Data Highlights

• In August 2023, Malaysia Industrial Production Index (IPI) declined by 0.3% YoY to 129.1 points. This decrease was above consensus estimate of -2.0% YoY but lower than the 0.7% increase observed in the previous month. Notably, the performance during the month was bolstered by domestic-oriented industries, which continued to show growth albeit at softer pace. Furthermore, a high base effect plays a significant role. In August 2022, the IPI experienced a notable 13.2% YoY surge. Consequently, on a MoM basis, the IPI registered a 2.8% increase, a stark contrast to the 1.8% contraction observed in the preceding month. 

• The manufacturing component, which makes up a substantial 65.9% share of the IPI, experienced a YoY reduction of 0.6% (with a MoM increase of 5.1%). This is in stark contrast to 0.2% YoY contraction reported in the previous reporting period. The decline in the manufacturing sector's output in August 2023 can be attributed to the contraction observed within export-oriented industries. Nevertheless, this decline was partially offset by resilience observed within the domestic-linked segment.
  • Export-oriented industries in the country recorded a YoY decline of 2.6%, slightly better than the 2.7% YoY decline registered previously. The drop was primarily driven in numerous sectors, including the Manufacture of rubber products, Manufacture of coke and refined petroleum products, Manufacture of textiles, Manufacture of machinery and equipment and Manufacture of computer, electronics and optical products. The performance of these industries is in tandem with the recent poor trade performance in August, which contracted by 18.6% YoY to RM115.16bn.
  • Domestic-oriented industries, meanwhile, increased by 5.7% YoY, vs 7.0% annual increase previously. Namely, most of the products registered a growth, except manufacture of basic pharmaceuticals, medicinal chemical and botanical products, which declined by 4.7% YoY. (See Figure 6). 
• In accordance with the decline in manufacturing output, the sector posted a lower sales value of RM152.28bn in the latest reporting period, denoting a YoY decrease rate of 3.3% (Jul: -3.0% YoY). The contraction in sales value was attributed by the petroleum chemical, rubber & plastic sub-sector, which decreased by 12.1% YoY, marking three consecutive months of double-digit declines. In addition, the deterioration was also attributable to the contraction of food, beverages & tobacco (-6.6% YoY); and wood, furniture, paper products & printing (-0.1% YoY) sub-sectors. 

• In the meantime, the mining output, which constitutes 25.1% of the total IPI, rose marginally by 0.1% YoY in August 2023 (Jul23: 4.2% YoY). The details revealed that the oil output shifted to negative territory, declining by 3.3% and natural gas production only recorded a moderate growth of 2.6% YoY as compared with previous month declined of 0.8% YoY. On a MoM basis, this segment declined by 5.4%. The mining sector encompasses the production of crude oil and natural gas, which accounted for 83.1% of the gross output value and 89.6% of the census valueadded of the mining sector in 2015.

• The electricity index, which represents 6.6% of the total IPI, grew by 1.9% YoY (0.3% MoM) during the month (Jul23: 1.5% YoY). Moreover, the increase indicates an increasing 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 - 13 Oct 2023