Data Highlights

• Due to the pronounced impact of the high base effect, Malaysia's Industrial Production Index (IPI) witnessed a decline in June 2023 (consensus forecast -1.0% YoY). The aggregate output, registering at 127.9 points, demonstrated a YoY contraction of -2.2%, diverging from the previous period's positive growth of 4.8%. Analyzing the data on a MoM basis, the IPI managed to attain a modest growth of 2.2%, contrasting with the robust 7.4% expansion seen in the prior month.

• The manufacturing component, constituting a substantial 65.9% share of the IPI, exhibited a YoY reduction of 1.6% (with a MoM increase of 5.5%), in stark contrast to the 5.1% YoY expansion registered in the preceding reporting period. This decline in the manufacturing sector's output can be attributed to the observable contraction within export-oriented industries, alongside the moderation observed within the domestic-linked segment.
  • Export-oriented industries in the country recorded a YoY decline of 3.9%, worse than the 2.9% YoY gain registered previously. The decline was primarily driven in numerous sectors, including the manufacture of coke and refined petroleum products, manufacture of rubber products and manufacture of computer, electronics and optical products. The weak performance was in tandem with the recent poor trade performance as total exports experienced a contraction of 14.1% YoY to RM123.98bn during the same month.
  • Domestic-oriented industries, meanwhile, moderated by 4.1% YoY, vs 10.1% annual increase previously. Namely, manufacture of basic pharmaceuticals, medicinal chemical and botanical products and manufacture of motor vehicles, trailers and semi-trailers. declined while the rest of the subcomponents recorded a moderation from the previous month. (See Figure 6).
• In accordance with the decreased manufacturing output, the sector posted lower sales value of RM147.4bn in the latest reporting period, denoting a YoY decrease rate of 4.0%. The increase was predominantly driven by the food, beverages & tobacco sub-sector, which decreased by 14.6% YoY, marking three consecutive months of double-digit declines. In addition, the deterioration was also attributable to the contraction in the petroleum, chemical, rubber & plastic (-12.4%); and wood, furniture, paper products & printing (-1.1%) sub-sectors. On a month-on-month comparison, the sales value increased marginally by 0.4% as against RM146.8bn recorded in May 2023.

• The mining output, which constitutes 25.1% of the total IPI, dropped by 6.4% YoY in June 2023, registering the lowest growth rate since May 2022 (-7.4% YoY). The decline was weighed down by downturns in both Natural Gas and Crude Oil & Condensate, with -7.8% YoY (May 2023: 4.5% YoY) and -4.5% YoY (May 2023: 0.6% YoY) respectively. On a month-on-month comparison, the Mining index shrank by -7.7% as compared to the 7.6% recorded in May 2023.

• The electricity index, which represents 6.6% of the total IPI, grew by 2.8% YoY during the month (May23: 5.9% YoY). Moreover, the MoM decrease of 5.3% indicates a declining momentum in the operations of the businesses. To note, the electricity index refers to the generation, collection, transmission, or distribution of electric energy to households, industrial, or commercial users.

Source: TA Research - 9 Aug 2023