PETALING JAYA: The higher-than-expected industrial production growth in December 2018 hints at a stronger economic expansion for Malaysia in the fourth quarter of 2018, according to MIDF Research.

Led by stronger manufacturing sector performance, the country’s industrial production index (IPI) for December 2018 rose by 3.4%, beating a Bloomberg survey of 2.7%.

In November 2018, the IPI increased at a slower pace of 2.6%.

MIDF Research expects Malaysia’s gross domestic product (GDP) to expand at a stronger pace of 5% in the fourth quarter of 2018, “given that overall IPI growth averaged at 3.5% year-on-year, the fastest since second-quarter 2018”.

The increase in industrial production for the month of December was driven by the rise in manufacturing index (4.4%), electricity index (2.7%) and mining index (1%).

Manufacturing sector output increased by 4.4% in December 2018 after expanding by 3.7% in November 2018.

Underpinning manufacturing’s growth in December were electrical and electronic equipment products (7.2%), transport equipment and other manufactures products (7.0%) as well as petroleum, chemical, rubber and plastic products (3.6%).

The electricity sector index increased by 2.7% in December 2018 from a year earlier.

The mining sector index rose by 1% in December 2018 from the previous year due to the growth in crude oil index (2.5%) but the natural gas index slipped by 0.2%.

For 2018, the IPI increased by 3.1% from 2017. The increase was contributed by the growth in manufacturing (4.8%) and electricity sector (3.7%). However, the mining sector declined by 1.9%.

Moving forward, MIDF Research anticipates the country’s IPI performance to expand at a steady pace in 2019 amid tapering trade tension, strong global demand, expected improvement in business environment as well as gradual pick-up in global commodity prices and currencies.

“We forecast IPI growth of 2.9% for 2019. As guided by the recent Business Tendency Survey data, we believe the IPI growth will be growing at 3% to 4% in the first half of 2019,” it said in a report.

“Referring to the survey, services and manufacturing sectors are expected to continue to drive up Malaysia’s economy while mining sector is predicted to recover modestly early of this year,” it added.

Source: https://www.thestar.com.my/business/business-news/2019/02/12/high-ipi-hints-to-firmer-economy-in-q4/#bUP4vqjYtdV7bEiV.99