IPI steady but may not last, says Public-Invest

KUALA LUMPUR: Malaysia’s industrial production index (IPI) has remained steady with negligible impact from the ongoing trade war between the United States and China but the resilience may not last.

Public Investment Bank Bhd (Public-Invest) said manufacturing sector contributed almost 25 per cent to the economy, the secondlargest contributor after services.

“Malaysia may be hit one way or another due to its significant position as the hub of intermediate goods. Our trade imbalance position with the US is also a nagging issue that needs an urgent attention as the US doesn’t seem to be budging on its intent to correct its various trade imbalances. This can be a source of downside risks to our growth next year,” it said in a note yesterday.

Malaysia’s industrial production growth slowed to 1.1 per cent year-on-year in June after dipping to three per cent in May (April: 4.6 per cent), below consensus expectation (3.2 per cent), as well as PublicInvest’s forecast (3.6 per cent).

It said manufacturing production growth improved to 4.5 per cent in June (May: 4.1 per cent), lifted by steadier demand for manufactured goods, in line with the sustained expansion in global manufacturing purchasing managers’ index (PMI).

PublicInvest said it had yet to see any tangible impacts on the key indicators so far from the USChina trade war.

“Global manufacturing PMI index is still encouraging, with a steady 53 points recorded in June, the same expansionary trend seen across the US, eurozone and Japan.

“Only China suffered weakness in the headline numbers, but this is not a concern as it was only marginal. This still indicates expansionary manufacturing activity in its economy.”

PublicInvest said it might take a quarter or so for the impact of trade frictions to show up due to the lag effect, adding that the headline PMI manufacturing numbers might show tangible signs in the third and fourth quarters, if any.

Malaysia may be hit one way or another due to its significant position as the hub of intermediate goods. PUBLIC INVESTMENT BANK BHD