Thursday 28 Mar 2024
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KUALA LUMPUR (Feb 12): Malaysia's December 2017 industrial production index (IPI) may have "disappointed" forecasts amid slower-than-expected growth due to contraction in mining output, but analysts are expecting production pick-up in the coming months.

In a note dated Feb 9, CIMB Research said headline Nikkei Malaysia Manufacturing Purchasing Manager Index (PMI) which improved to 50.5 points in January from 49.9 in December suggests that production "may regain momentum".

"Output growth was muted but manufacturers reported improvement in new orders, including those from abroad.

"Buoyed by expectations of better operating conditions in the coming months, employers were carefully increasing hiring plans and boosting average selling prices to pass on higher input costs," it said.

Malaysia's IPI rose 2.9% on-year in December, which was sharply below market expectations of around 4.6%. The index rose 5% on-year in November.

This came as mining output posed a 4.1% decline against a 0.2% climb in November, compared with a "gentler" moderation in manufacturing activity from subdued export trades. Electricity index growth on-year stayed unchanged in November and December at 3.9%.

"Mining output declined in December on lower production of petroleum (-5% in Dec, 3% in Nov) and natural gas (-3.2% in Dec, 0% in Nov)," said CIMB. "Activity in the downstream oil and gas sector was predictably more tempered, gaining 1.7% y-o-y (year-on-year) in December, following a robust 9.4% y-o-y jump in November."

In a separate note, HLIB Research highlighted that December 2017 IPI rose 2.2% month-on-month (m-o-m), which was a reversal from the 1.4% m-o-m decline in November. Fourth-quarter IPI expanded at a slower pace of 3.8% on-year however, from 5.9% in 3Q.

It said crude oil output is "expected to remain volatile in the near term", following Petronas' production cut of 20,000 barrels per day under the OPEC output curb agreement, which has been extended until end-2018.

"Near-term outlook for manufacturing IPI remains in expansionary mode as indicated by forward indicators (i.e. global PMIs, world chip sales, and business confidence). Nevertheless, we expect manufacturing growth to be more moderate as global restocking activity comes to an end," it added.

CIMB Research is estimating real gross domestic product (GDP) to moderate to 5.7% y-o-y in the fourth quarter of 2017 from 6.2% in the third quarter.

Both research houses are expecting Malaysia's full-year 2017 GDP expansion to be at 5.9%. CIMB has also forecasted 2018 GDP to moderate to 5.2%, while HLIB's estimates pointed to 5.3% "as base effect and exuberance wear off".

 

 

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