Thailand
Malaysia: Marginal growth seen in IPI for rest of the year
PETALING JAYA: Malaysia’s Industrial Production Index (IPI) in September, which rose 1% year-on-year, came in below expectations and has set the stage for marginal growth for the remaining of the year.
The index, which measures the levels of production and capacity in the main economic areas of a country such as manufacturing, saw a growth lower than the 1.8% predicted by local research house JF Apex Securities Sdn Bhd and much lesser than the 2.3% growth expected by the overall market.
JF Apex told its clients in a report that for the remaining months in the second half of 2020, it expected the IPI to register marginal growth in view of the new wave of Covid-19 cases, which will hamper economic activities.
“We expect minimal growth of industrial production as the outbreak will affect global activities as well as our export-oriented output, “ it added.
In the latest IPI update, electricity output widened its contraction to -2.1% from -1.2% in the previous month while mining production contracted by a larger 9.6% following lesser production of both crude oil and natural gas, JF Apex noted.
However, the manufacturing sector, which was the largest component in the IPI, gained 4.3% buoyed by improved growth for both domestic and export-oriented output, the research house added.
Moving forward, it believes that the introduction of stimulus packages by the government could ease the burden of industries and marginally support production growth.
But on the whole, JF Apex expects the IPI to register a fall this year and is retaining its IPI forecast of -3.1% for 2020.
“Other downside risks include a new wave of Covid-19 cases as well as relatively low commodity prices, especially crude oil and crude palm oil.”
Meanwhile, in an economic report to clients, AmBank took on some optimism, pointing out that in tandem with improving business activities and consumer confidence following the relaxation of restrictive movements, the labour market is seeing a spillover effect.
It said this was reflected by the improvement of the recent IPI data, which it said at 1%, was still the fastest expansion since July this year.
“Manufacturing continued to be underpinned by exports and domestic activities.
“The electrical and electronics (E&E) segment is seen benefitting from the pick-up in global semiconductor sales while at the same time, manufacturing is supported by domestic activities such as transport equipment and other manufacturers (4.5%), food, beverages and tobacco (4.9%), petroleum and chemical products (3.2%) as well as furniture and wood products (2.3%), ” it noted.
Still, it said while third-quarter 2020 should witness an improving economy, with gross domestic product during this quarter expected to show a slower contraction of between -2% and -3%, pressure would emerge in the fourth quarter as a result of fresh restrictive measures following the recent rise in the number of new Covid-19 cases.
Source: https://www.thestar.com.my/business/business-news/2020/11/11/marginal-growth-seen-in-ipi-for-rest-of-the-year