Data Highlights

• Malaysia Industrial Production Index (IPI) declined by 0.5% YoY to 130.5 points. This decrease was greater than consensus estimate of -0.1% YoY and reduced further from the 0.3% declined observed in the previous month.

• The manufacturing component, which makes up a substantial 65.9% share of the IPI, rebounded modestly by 0.4% (with a MoM increase of 2.2%). This is in stark contrast to 0.6% YoY contraction reported in the previous reporting period.

• Notably, the export-oriented industry continued to drag the overall performance during the month with a decline of 2.0% YoY. Nonetheless, the performance was offset by resilient domestic-oriented industries, which continued to show growth. Furthermore, a high base effect plays a significant role. In September 2022, the IPI experienced a notable 10.8% YoY surge. Consequently, on a MoM basis, the IPI registered a 1.1% increase.
  • Export-oriented industries in the country recorded a YoY decline of 2.0%, slightly better than the 2.6% YoY decline registered previously. The drop was primarily driven by numerous sectors, including the Manufacture of coke and refined petroleum products, Manufacture of furniture, Manufacture of rubber products, Manufacture of electrical equipment and Manufacture of machinery and equipment. The weak performance of these industries is in tandem with the recent poor trade performance as total exports contracted by 13.7% YoY during the month to RM124.47bn.
  • Domestic-oriented industries, meanwhile, increased by 5.9% YoY, vs 4.2% annual increase previously. Namely, most of the products registered a growth, except manufacture of basic pharmaceuticals, medicinal chemical and botanical products which declined by 6.7% YoY. (See Figure 6).
• In accordance with the increase in manufacturing output, the sector posted a lower sales value of RM157.70bn in the latest reporting period, denoting a lower YoY decrease of 1.9% (Aug23: - 3.3% YoY). The contraction in sales value was attributed by Petroleum, chemical, rubber & plastic sub-sector, which shrank by 12.3% YoY. In addition, the deterioration was also attributable to the contraction in the Food, beverages & tobacco (-1.7% YoY); and Wood, furniture, paper products & printing (-0.7% YoY) sub-sectors.

• In the meantime, the mining output, which constitutes 25.1% of the total IPI, declined by 5.2% YoY in September 2023 (Aug23: 0.1% YoY). The details revealed that the oil and natural gas output declined by 1.4% and 7.8% YoY as compared with the previous month’s -3.3% and 2.6% YoY, respectively. On a MoM basis, this segment declined by 1.6%. 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 value-added of the mining sector in 2015.

• The electricity index, which represents 6.6% of the total IPI, grew by 2.5% YoY (-4.0% MoM) during the month (Aug23: 1.9% 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 - 8 Nov 2023