KUALA LUMPUR (Sept 12): AmBank Research said it remains fairly cautious on the August manufacturing PMI data.

In an economic note today, its chief economist Anthony Dass said industrial production continued to grow at a fast pace by 6.1% year-on-year (y-o-y) in July supported by sharp manufacturing and electricity.

He said both rose 8.0% and 7.9% y-o-y respectively with mining improving marginally by 0.2% y-o-y.

Dass said he believes the strong manufacturing output was largely supported by export-led activities reflected by the 30.9% y-o-y growth in exports in July.

“However, we would like to remain fairly cautious on the August manufacturing PMI data.

“Growth is largely coming from an improvement in new export orders. Domestic demand still remains lukewarm.

“With domestic activities still staying lukewarm, the current overnight policy rate (OPR) of 3.00% is likely to stay which is our base case scenario.

“We still maintain our 45% chance for a 25bps rate hike in 4Q2017,” he said.

Dass added this can happen only if domestic activities pick up strongly thus accelerating the demand pull pressure.