● Industrial Production Index (IPI) YoY growth registered its biggest contraction in six months in November (- 2.2%; Oct: -0.5%), falling considerably below market expectations (KIBB: 1.3%; consensus: 0.1%)

- Attributable to the continued impact of COVID-19 restrictions, with cases surging locally and abroad, as well as a sizeable fall in external demand (exports: - 7.3% MoM).

- MoM (-2.7%; Oct: 1.7%): first decline in three months.

● Manufacturing index expansion softened to a six-month low (2.0%; Oct: 2.4%), in line with a moderation in manufacturing sales growth (2.1%; Oct: 2.2%)

- A deeper contraction in the food, beverages & tobacco subsector (-8.7%; Oct: -3.4%) outweighed rising growth in electrical & electronic products (8.3%; Oct: 7.5%) and transport equipment & other manufactures (6.5%; Oct: 3.5%).

- MoM (-3.0%; Oct: 0.1%): largest contraction in seven months.

● Mining index contraction continued for nine straight months, worsening to -15.4% YoY (Oct: -10.6%), partly due to a high base effect

- Broad-based slowdown led by the declining extraction of crude oil & natural gas (-15.4%; Oct: -10.6%) and followed by larger falls in natural gas (-15.1%; Oct: -9.0%) and crude petroleum production(-15.8%; Oct: -12.6%).

- The contraction in mining output may slow in the near term as oil prices are expected to recover, with average Brent crude oil prices rising to USD50.0/barrel in December (Nov: USD42.7/barrel).

- MoM: declined after rebounding the month prior (-0.7%; Oct: 7.6%).

● Electricity index fell back into contraction (-2.5%; Oct: 0.8%)

- MoM (-6.0%; Oct: 3.9%): fastest drop in seven months.

● 2020 manufacturing IPI growth is expected to average around -2.9%; a growth rebound in 2021 is expected but to be weighed in the near term by the reinstatement of COVID-19 restriction measures in January

- The extension of COVID-19 restrictions abroad and the reintroduction of full Movement Control Orders (MCO) in several key states will continue to impede production activities and stifle demand conditions going into 2021.

- Nevertheless, we expect industrial production to gradually recover (2021F: 6.5%), particularly in 2H21, on the basis of a wider rollout of COVID-19 vaccines and a recovery in external demand following the gradual restoration of supply chains. This is in line with the projected rebound in 2021 GDP growth (6.1%; 2020F: -5.1%).

Source: Kenanga Research - 12 Jan 2021