• Industrial Production Index (IPI) growth moderated in January (1.2%; Dec: 1.7%), beating market expectation and below house forecast (KIBB: 1.5%; consensus: 1.0%)
  •  Reflecting the softer exports growth (6.6%; Dec: 10.8%) and the lower manufacturing PMI (48.9; Dec: 49.1).
  •  MoM (0.1%; Dec: 4.7%): subdued performance, as demand and business conditions were impacted by the renewed lockdown measures domestically and in most countries in January.
•  Manufacturing index expansion eased to 3.5% (Dec: 4.1%), in line with the slight slowdown in manufacturing sales growth (4.1%; Dec: 4.5%)
  • Attributed to a lower growth in the production of petroleum, chemical, rubber & plastic products (4.5%; Dec: 7.7%) and transport equipment (-0.2%; Dec: 8.4%). In contrast, electrical and electronics output rose at a faster pace (7.9%; Dec: 7.6%) amid the ongoing technology upcycle.
  • MoM (-0.2%; Dec: 3.3%): declined marginally, after rebounding in the previous month.
• Mining index contraction narrowed to its smallest in six months (-4.5%; Dec: -5.4%)
  • The improvement was spearheaded by the natural gas output (-0.5%; Dec: -2.5%), outpacing a steeper fall in crude petroleum production (-9.4%; Dec: -9.0%).
  • MoM (1.7%; Dec: 10.8%): continued to expand, albeit at a more modest pace.
• Electricity index marked the largest drop since July 2020 (-4.6%; Dec: -0.2%)
  • MoM (-2.2%; Dec: 3.0%): reverted to a contraction, as commercial electricity demand decreased following the reinstatement of the Movement Control Order (MCO) 2.0 on 13th January.
• Manufacturing production is forecasted to rebound to 6.5% this year (2020: -2.7%)
  • Production activities are expected to recover, especially following the relaxation of lockdown measure on 10th February, underpinned by the vaccine-induced external demand recovery, global semiconductor upcycle and the rise in commodity prices.
  • Against this backdrop, 2021 GDP growth is projected to rebound to 4.5%, from a contraction of 5.6% last year.

Source: Kenanga Research - 15 Mar 2021