• Industrial Production Index (IPI) moderated in November (0.6% YoY; Oct: 2.4%), matching the house forecast (0.6%) but lower than consensus (1.5%)
  • The weak performance was mainly due to a broadbased slowdown, led by a contraction in the manufacturing sector, particularly the export-oriented sub-sector and a moderate growth in the mining and electricity sectors. This is also partly due to seasonal factors, as November is usually a weaker month.
  • MoM (-0.9%; Oct: 1.9%): contracted to four-month low following three straight months of positive expansion.
     
• The manufacturing index fell marginally (-0.1% YoY; Oct: 0.9%) following two straight months of positive expansion, mainly due to a deeper contraction in the output of export-oriented sub-sector, but partially mitigated by a resilient domestic-oriented sector
  • Domestic-oriented: moderated (5.8%; Oct: 6.7%) but remained supported by higher output of food processing products (10.9%; Oct: 9.4%), followed by fabricated metal products (8.9%; Oct: 6.8%) and non-metallic mineral products (6.9%; Oct: 6.5%).
  • Export-oriented: contracted for the fifth straight month (-2.7%; Oct: -1.6%) and lowest in four-month. This is largely. due to the weak E&E sector (-6.8%; Oct: -3.9%), particularly the output of computer, electronics & optical products (-8.6%; Oct: -4.3%), which fell for the sixth straight month.
  • MoM (-0.3%; Oct: -1.3%): fell for the second straight month, albeit at a smaller contraction.
     
• Mining index growth slowed sharply to 1.9% in November (Oct: 7.4%)
  • It was a broad-based slowdown led by lower output in natural gas (1.7%; Oct: 7.6%), followed by extraction of crude oil & natural gas (1.9%; Oct: 7.4%) and crude petroleum (2.1%; Oct: 7.2%).
  • MoM (-1.8%; Oct: 15.3%): contracted following a surge in the previous month.
     
• Electricity index expanded for the seventh straight month (4.2%; Oct: 5.6%) albeit at a slower pace
  • MoM (-4.6%; Oct: 5.3%): fell sharply to a five-month low, following a sharp rebound in the previous month.
     
• Overall, the 2023 manufacturing index growth may settle around our forecast of 1.0% (2022: 8.2%), and we are revising the 2024 forecast to expand to 4.6% from 3.2% in anticipation of a robust recovery in the 2H24
  • As of January-November 2023, manufacturing index moderated to 0.9% compared to 8.7% recorded in the same period of 2022. The slower growth was associated with weak global trade activity brought by heightened geopolitical tensions, tighter financial conditions in advanced economies and China’s slower-than-expected post-pandemic recovery. This was reflected by subdued Manufacturing PMI (47.9; Nov: 47.9), which remained in contraction (below neutral level: 50.0) since August 2022, while exports continue to decline (Nov: -5.9%; Oct: -4.5%) for the ninth straight month. Nevertheless, growth has been supported by a steady domestic-oriented sector amid resilient domestic demand and the influx of tourists as the economy returns to normalcy.
  • Likewise, we anticipate a manufacturing sector recovery amid the expectation of a technology upcycle, particularly in the 2H24 and China’s gradual post-pandemic recovery. This, along with a resilient services sector, is expected to boost 2024 GDP growth to 4.9% from an estimated 3.5% - 4.0% in 2023 (2022: 8.7%).

Source: Kenanga Research - 12 Jan 2024