KUALA LUMPUR: Malaysia’s industrial production index (IPI) rose 7% in January 2015 from a year earlier on increases in all three components — manufacturing, mining and electricity — of the output gauge.

This came in slightly lower than a median market forecast of a 7.4% increase, based on a Reuters survey. It is also a moderation from 7.4% recorded in December 2014.

In a statement yesterday, the Statistics Department said output from the manufacturing, mining and electricity sectors increased 6.5%, 8.3% and 6.3% respectively.

The rise in manufacturing output was underpinned by increases in the production of electrical and electronics products, petroleum, chemical, rubber and plastic products as well as non-metallic mineral products, basic metal and fabricated metal products.

The rise in the production of the mining sector was underpinned by the increase in crude oil index by 16.7%. However, the natural gas index decreased by 0.6%.

Meanwhile, the electricity sector recorded an on-year increase of 6.3% in production.

However, the IPI in January 2015 decreased by 1% on a monthly basis due to decreases in output for the manufacturing (-1.2%) and mining (-0.4%) indices, with only the electricity index recording an increase of 2.3%. 

M&A Securities said based on the data, the country is successfully reaping the benefits of a weaker ringgit given the manufacturing sector’s solid output of 6.5% in January, thumping the sector’s 2014 and fourth quarter 2014 average growth of 6% and 4.8% respectively.

“Note that the ringgit has averaged at RM3.58 per US dollar in January against the average of RM3.47 per US dollar in December 2014 and compared with RM3.30 per US dollar January in 2014,” it said.

However, the steady output by the manufacturing sector has failed to translate into solid exports given the decline in Malaysian exports in January by 0.6%.

“We opine that exporters can only be restocking their goods, taking advantage of cheaper raw material cost before the [implementation of the] goods and services tax in April and hence, has yet to ship their goods out,” it said.

Looking ahead, M&A Securities expects the IPI to be commendable in the first quarter given the competitive ringgit, softness in commodity prices and weather related factors.

“At this juncture, given the likelihood of the ringgit to continue descending, we opine that the manufacturing sector will be the saviour of the country in line with the expectations of the central bank,” it added.

The Statistics Department also released data on the manufacturing sector, which showed sales value of the sector rising 2.7% in January to RM57.1 billion from RM55.6 billion a year ago.

Month-on-month, the sales value has increased by 1.5% or RM800 million compared with the preceding month.

Total employees engaged in the manufacturing sector rose 0.5% or 5,629 to 1,034,193 persons in January from a year ago.

This article first appeared in The Edge Financial Daily, on March 13, 2015.