MANUFACTURING BOOST TO INDUSTRIAL PRODUCTION
Strong demand seen for electrical and electronics, rubber products
MANUFACTURING is likely to be the key sector to buoy Malaysia’s industrial production with the strong external demand providing a cushion, said Moody’s Analytics.
In a report titled “Malaysia Industrial Production”, associate economist Sonia Zhu said she expected Malaysia’s industrial production to pick up in the coming months due to robust external demand and a low base effect.
Sustained growth in external demand would continue to bolster the production outlook for trade-oriented industries, given the strong demand for electrical and electronics, and rubber products and better economic prospects for major trading partners, such as the United States and China, she added.
The financial intelligence company said Malaysia’s industrial production grew 1.5 per cent year-on-year in February, following the 1.2 per cent increase in the previous month.
The growth in February was primarily driven by the manufacturing sector as electrical and electronics exports surged on the back of higher global demand.
Moody’s Analytics added that the sustained growth in production activities was driven by a slower contraction in mining output and sustained output in the manufacturing sector.
Nevertheless, manufacturing and electricity fell on monthly terms in February due to the Movement Control Order (MCO), which was only lifted early last month.
Transport equipment saw a surprising uptick in February, too, despite domestic and international travel restrictions.
Growth of consumer products such as food and beverages and tobacco, as well as textiles, remained sluggish as a result of shorter business operating hours and limited community mobility during the MCO period.
Production of rubber products boosted the manufacturing index as well, as global demand for medical rubber gloves continued to thrive amid the Covid-19 pandemic, increasing by 8.9 per cent year-on-year.
“We foresee the manufacturing sector to continue bolster the industrial production index, as indicated by the 6.4 per cent yearon-year growth in manufacturing sales in February,” it said.
The mining sector slipped again, attributed to a decrease in crude oil and condensate index (-11.5 per cent) and natural gas index (-1.6 per cent).
Crude oil price volatility rose following new lockdowns in Europe and a resurgence in Covid-19 cases in Asia, which added a level of uncertainty and pessimism to the eventual abatement of the pandemic, said Moody’s Analytics.
“But with the success of the worldwide vaccination drive, we foresee oil prices to trend upwards later this year,” it added.