• Industrial Production Index (IPI) grew by a stronger 6.1% YoY in April (Mar: 2.4%), but not as high as expected (KIBB: 9.5%; consensus: 6.5%)
  
  − The YoY growth expansion was driven by an expansion in the manufacturing and mining sectors, and waspartly due to the lower base effect from last year.
  
  − On MoM, however, it fell sharply by 7.6% (Mar: 7.6%), a 12-month low, partly due to April typically being the weakest month seasonally.

• The manufacturing index rose to an 11-month high in April (4.9% YoY; Mar: 1.3%) backed by solid domestic- oriented and recovery in the export-oriented industries
  
  − Domestic-oriented: accelerated (9.5%; Mar: 3.1%), steered by the surge in output of manufacture of motor vehicles, trailers & semi-trailers (20.2%; Mar: -10.0%) followed by the manufacture of fabricated metal products, except machinery & equipment (12.8%; Mar: 11.1%) as well as the manufacture of other non-metallic mineral products (11.2%; Mar: 7.6%).
  
  − Export-oriented: expanded (2.6%; Mar: 0.5%), led by the higher output in the manufacture of coke & refined petroleum products (5.9%; Mar: 1.9%) and manufacture of chemicals & chemical products (5.0%; Mar: -4.0%). This is also contributed by the expansion in the manufacture of furniture (13.1%; Mar: 12.6%). Nevertheless, growth was partially capped by the decline in the output of computer, electronics & optical products (-1.4%; Mar: 2.0%).
  
  − MoM (-8.2%; Mar: 7.9%): fell sharply to a 12-month low, following a sharp rebound in the previous month, partlydue to seasonal trends and the festive period.

• Mining index growth surged (10.0%; Mar: 4.9%) to a 19-month high
  
  − It was a broad-based expansion, led by higher output of extraction of crude oil & natural gas (10.0%; Mar: 4.9%), followed by natural gas (14.9%; Mar: 8.9%) and crude petroleum (3.5%; Mar: -0.7%).
  
  − MoM (-6.3%; Mar: 5.3%): fell to a two-month low and tracking the seasonal trend.

• Electricity index moderated slightly (7.6%; Mar: 8.5%) to a four-month low
  
  − MoM (-4.1%; Mar: 11.2%): fell to a two-month low following a sharp rebound in the previous month.

• The manufacturing index forecast is maintained at 4.6% (2023: 0.7%) on strong expected growth in the 2H24
  
  − Manufacturing sector especially the export-oriented is expected to continue to recover as the latest Manufacturing Purchasing Managers' Index (PMI) reading turned to expansion in May (50.2; Apr: 49.0) after 20 straight months of contraction. Meanwhile, the domestic-oriented industry is expected to remain robust, supported by strong domestic demand, an increase in tourist arrivals, and stable labour market conditions. However, downside risk persist, mainly due to US-China trade tensions, the on-going Russia-Ukraine war, and Middle East conflicts. Additionally, congestion in ports amid the Red Sea crisis remains a concern and is expected to worsen as Chinese exporters will likely frontload their shipments to the US in the short term, ahead of the August tariff hike.
  
  − On the domestic growth outlook, we expect GDP to continue expanding in 2Q24 at 4.3%, following a better-than- expected 1Q24 GDP of 4.2%. With this in mind, we maintain our 2024 GDP forecast at 4.5% - 5.0% (2023: 3.7%).

Source: Kenanga Research - 11 Jun 2024