KUALA LUMPUR (April 12): Malaysia’s industrial production (IP) in the coming month would be moderate on concerns of a rising trade war between the US and China and a stronger ringgit which will have some knock-on effects on exporters’ business sentiments, according to AmBank Group Research.

In a report today, AmBank group chief economist and head of research Dr Anthony Dass said this was reflected by March manufacturing PMI which was at 49.5.

“Our preliminary estimates for 1Q2018 gross domestic product (GDP) is 5.8% year-on-year (y-o-y) with our full-year outlook at 5.5% which is at the lower end of the official projection of 5.5% and 6.0%,” he said.

Dass said February’s IP rose 3.0% y-o-y following moderate growth from the manufacturing sector (+4.7% y-o-y) and electricity output (+2.8% y-o-y) with the mining sector output down (-1.6% y-o-y). 

He said it was partly due to shorter working days added with the Chinese New Year celebration which also affected poor exports performance (-2.0% y-o-y) and manufacturing PMI (49.9).

Commenting on China, Dass said the Producer Price Index continued to cool in March, slowing to a 17-month low and backing the research house's expectation of a broader slackening in economic growth in 2018 with a reading of 3.1% y-o-y.

He said the Consumer Price Index also eased in March as the effects of a booming demand spurred by the Lunar New Year holidays in February receded to 2.1% y-o-y in March.

“Our concern remains on the trade war between the US and China. It has raised our focus on the Chinese inflation outlook, though we think the proposed tariffs on US soybeans and pork will have limited impact on consumer inflation.

“We think the broad price pressures will remain soft due to a slowdown in credit growth which is feeding through to an overall softening in the economic activity to around 6.4% in 2018,” he said.