Malaysia’s March IPI up 5.1% YoY, fastest pace in three months

KUALA LUMPUR (10 May): Malaysia’s Industrial Production Index (IPI) rose at its fastest pace in three months at 5.1% year-on-year (yoy), as all three sectors of the IPIs have grown, especially for the manufacturing sector.

MIDF Research said in a report released on Tuesday (May 10th) that the rise in the IPI exceeded general market expectations. The IPI was up 4.0% y/y in February and 4.3% y/y in January.

The manufacturing sector recorded the strongest growth at 6.9% year-on-year in March, after 5.2% in February, according to statistics released by the Department of Statistics Malaysia (DOSM).

Within the manufacturing sector, the main sub-sectors that contributed to growth in March were mainly electrical and electronic products (18.6%). Other major sub-sectors such as non-metallic mineral products, base metals and metal products grew by 5.6%, while food, beverages and tobacco grew by 4.1%.

Output in the mining sector rose 0.3% in March from a year earlier. DOSM said the growth was mainly driven by the 5.7% rise in the natural gas index. However, the crude oil and condensates index fell 6.8%.

As for the production of the electricity sector, it increased by 0.8% in March year-on-year.

The IPI also recorded higher output growth in export-oriented industries, supported by the manufacture of electrical equipment (22.4%), the manufacture of computer, electronic and optical products (20.5% ) and the manufacture of coking and refined petroleum products (12.5%).

However, IPI growth in domestically-oriented industries slowed to 5.1% year-on-year, the slowest in six months, the MIDF said, due to moderation in the production of household goods. consumption and the decline in the production of motor vehicles.

“Going forward, we expect the reopening of the economy and improving supply conditions to be positive for the production outlook in the months ahead. However, supply-side constraints remain the main downside risk to the production outlook, as demand is expected to continue to grow going forward. “, said the research house.

Notably, the research house pointed out that the pace of global manufacturing activity slowed in March, matching the decline in the global manufacturing Purchasing Managers’ Index (PMI) to 52.9 points. .

This is the slowest expansion since October 2020, the research house noted.

“The lower production reflects the challenges faced by producers due to supply constraints and rising commodity prices, particularly due to the war in Ukraine. Although we expect higher prices for commodities and rising input costs will continue to limit production growth, we fear that weak external growth demand given the lockdown in China will be another drag on top of the delayed normalization of the state supply,” he explained.

The MIDF nevertheless expects production activities in Malaysia to continue to expand as manufacturing sector activities improved in April 2022, with the manufacturing PMI rising to 51.6 points from 49.6 in March.

However, he warned that although IPI growth was better than expected in the first three months of the year, the ongoing war in Ukraine and the lockdown in China could affect export-oriented sectors of Malaysia. Rising production costs and material shortages could also affect local production prospects.

That said, the MIDF noted that domestically oriented sectors will benefit from a further reopening of the economy and the easing of Covid-19 related restrictions.

The research house maintained its IPI growth forecast at 4.3% for 2022, compared to 7.2% for 2021.

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