Data Highlights

• The Malaysia Industrial Production Index (IPI) registered a modest 0.6% YoY growth, reaching 131.8 points. Nevertheless, this uptick fell short of the consensus estimate of 1.0% YoY and marked a decline from the revised 2.4% YoY increase recorded in the preceding month. The initial report for October 2023 had indicated a larger 2.7% YoY increase.

• The manufacturing component, which makes up a substantial 65.9% share of the IPI, declined by 0.1% YoY during the month (with a MoM decrease of 0.3%). This is in contrast to 0.9% YoY increase reported in the previous reporting period.

• Notably, the export-oriented industry continued to drag the overall performance during the month with a larger decline of 2.7% YoY. Nonetheless, the performance was offset by resilient domestic-oriented industries, which continued to show growth.
   
  • Export-oriented industries in the country recorded a YoY decline of 2.7%, weaker than the 1.6% YoY contraction registered previously. The drop was primarily driven by numerous sectors, including the Manufacture of computer, electronics and optical products, Manufacture of textiles, and Manufacture of coke and refined petroleum products. The performance of these industries was in tandem with the recent poor trade performance as total exports contracted by 5.9% YoY during the month to RM122.10bn.
     
  • Domestic-oriented industries, meanwhile, rose by 5.8% YoY, vs. 6.7% annual increase previously. Namely, most of the products registered a growth, except manufacture of basic pharmaceuticals, medicinal chemical and botanical products which declined by 6.5% YoY. (See Figure 6).
     
• In accordance with the decrease in manufacturing output, the sector posted a lower sales value of RM155bn in the latest reporting period, denoting a higher YoY decrease of 2.6% (Oct23: - 1.4% YoY). The contraction in sales value was attributed by the drop in the petroleum, chemical, rubber & plastic products sub-sector by 10.8% YoY (Oct23: -9.5% YoY); and the electrical & electronics products sub-sector, which fell by 5.3% YoY (Oct23: -2.7% YoY).

• In the meantime, the mining output, which constitutes 25.1% of the total IPI, rose by 1.9% YoY in November 2023 (Oct23: 7.4% YoY). The details revealed that the oil and natural gas output increased by 2.1% and 1.7% YoY, respectively as compared with the previous month’s 7.2% and 7.6% YoY, respectively. On a MoM basis, this segment declined by 1.8%. 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 4.2% YoY (-4.6% MoM) during the month (Oct23: 5.6% 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.

Our Thoughts

• The IPI has sustained a moderate expansion year-to-date, registering a 1.0% YoY increase during the initial eleven months of the current year (2022: 6.7%). In addition, the manufacturing sector displayed a moderate growth trajectory, recording a 0.9% YoY (2022: 8.2%), while the mining index saw a modest rise of 0.6% YoY (2022: 2.2%) over the same period. Notably, the electricity index exhibited more substantial enhancement, achieving a better growth of 2.3% YoY (2022: 3.6%).

• As we approach the conclusion of the last quarter of the previous year, we foresee an enhancement in overall economic output, largely attributed to the increases observed in both October and November. Across all subsegments, there has been notable improvement, with the manufacturing, mining, and electricity sectors exhibiting YoY growth rates of 0.4%, 4.6%, and 4.9%, respectively. This acceleration surpasses the growth recorded in the third quarter of 2023, suggesting the possibility of a faster Gross Domestic Products (GDP) growth than the 3.3% recorded in the previous quarter.

• For a more comprehensive understanding of the actual GDP figure for the final quarter of 2023, set to be released in February, our focus turns to the Advance GDP Estimates expected on 19th January. These estimates are poised to offer a more detailed perspective and profound insights into the factors influencing economic growth during this crucial period.

Source: TA Research - 12 Jan 2024