• Industrial Production Index (IPI) slowed in March (2.4% YoY; Feb: 3.1%), but surpassed expectations (KIBB: 1.9%; consensus: 1.8%)
  
  − Slower growth was due to a slowdown in the mining and electricity sectors but was partially offset by a modest expansion in the manufacturing index.
  
  − MoM (7.5%; Feb: -6.3%): rebounded sharply to a 12- month high, partly attributable to a seasonal factor.
  
  − 1Q24 (3.3%; 4Q23: 0.8%): overall, growth accelerated to a five-quarter high or the highest since 4Q22 backed mainly by manufacturing recovery.

• The manufacturing index expanded slightly in March (1.3% YoY; Feb: 1.2%), reflecting a continued recovery in the export-oriented industries
  
  − Domestic-oriented: moderated (3.1%; Feb: 4.1%) but remained supported by the manufacture of fabricated metal products except machinery & equipment (11.1%; Feb: 8.4%), followed by the manufacture of other non- metallic mineral products (7.6%; Feb: 5.1%).
  
  − Export-oriented: rebounded slightly (0.5%; Feb: -0.2%), led by the manufacture of computers, electronics & optical products (2.0%; Feb: 0.3%), followed by coke & refined petroleum products (1.9%; Feb: 2.2%).
  
  − MoM (7.9%; Feb: -6.3%): rebounded sharply to a 21-month high, following a sharp drop in the previous month amid seasonal factors.
  
  − 1Q24 (2.1%; 4Q23: -0.2%): rebounded, charting positive growth after two consecutive quarters of decline.

• Mining index growth slowed (4.9%; Feb: 8.1%) to a three-month low
  
  − It was a broad-based slowdown, led by a sharp moderation in the output of extraction of crude oil & natural gas(4.9%; Feb: 8.1%), and a decline in crude petroleum output (-0.7%; Feb: 2.5%).
  
  − MoM (5.3%; Feb: -6.9%): rebounded to the highest since October 2023.
  
  − 1Q24 (5.9%; 4Q23: 3.7%): expanded to a five-quarter high, partly due to a lower base effect last year.

• Electricity index slowed (7.8%; Feb: 10.9%) to a three-month low, but remained relatively high
  
  − MoM (10.4%; Feb: -4.5%): rebounded sharply to a 12-month high partly due to seasonal factors.
  
  − 1Q24 (8.9%; 4Q23: 4.6%): surged to a six-quarter high, or the highest since 3Q22.

• Manufacturing index forecast retained at 4.6% (2023: 0.7%)
  
  − Manufacturing performance is expected to improve, driven by further improvement in external demand backed bythe technology sector’s upswing and China's recovery. Notably, the latest Manufacturing Purchasing Managers' Index (PMI) reading points to a stabilization in April (49.0; Mar: 48.4), nearing the 50.0 neutral level. Meanwhile, the domestic-oriented industry is expected to remain robust, supported by resilient domestic demand. This is fueled by increased tourist arrivals and spending, along with stable labour market conditions. The average unemployment rate is projected to decrease to 3.2% in 2024 (2023: 3.4%).
  
  − Likewise, we maintain our 1Q24 GDP growth target at 3.3% (4Q23: 3.0%), slightly lower than the advanced GDP estimate by DOSM at 3.9%. Overall, our growth forecast remains at 4.5% - 5.0% in 2024 (2023: 3.7%).

Source: Kenanga Research - 13 May 2024