Economists say output likely to continue uptrend

PETALING JAYA: Despite the slower industrial production index (IPI) in April 2017, economists remain optimistic on the near-term outlook and that the performance will remain stable with an upward bias.

The country’s industrial production in April rose 4.2% from a year earlier, according to data from the Statistics Department, supported by strong growth in the manufacturing and food and beverage sectors.

The growth, however, was lower than the consensus estimate of a 4.8% annual rise by a Reuters poll and slower than the 4.6% increase in March.

MIDF Research said the encouraging trend of the IPI growth is expected to continue in the coming months. It said that the perfor- mance of Malaysia’s industrial production remained stable with an upward bias.

“We maintain an IPI growth of 5.3% for 2017. The encouraging trend of the IPI growth is expected to continue in the coming months.

“Due to the strong export performance in the first four months of 2017, we believe the upbeat momentum in trade will have positive spillover effects on Malaysia’s industrial production this year,” MIDF said.

The research house noted that industrial production among regional and global economies saw a slight slowdown during the month of April despite a positive development in global trade activities.

Hong Leong Investment Bank (HLIB) Research said the uptick in manufacturing production was more than offset by a decline in mining and electricity production.

Month-on-month, the IPI reversed course, falling 5.4% after rebounding strongly in the previous month. HLIB Research said the moderation in April 2017’s IPI suggested that the economic momentum had softened in the earlier part of second-quarter 2017.

“Nevertheless, the near-term outlook for the manufacturing IPI remains favourable with continued expansion in forward indicators. Downside risks have diminished but centred along anti-protectionism threats,” it said.

“We maintain our forecast for gross domestic product (GDP) growth to moderate in the second half of 2017. Full-year GDP growth forecast is unchanged at 4.9%. We also retain our forecast for Bank Negara to maintain its policy rate at 3%,” HLIB Research added.

Meanwhile, JF Apex Securities said the latest IPI figures were once again below its expectations and market consensus.

“We expect the IPI will show a slower year-on-year growth of 4% in May 2017 due to the weak performance of the mining index and electricity index.

“However, the expansion of the IPI will still be supported by the performance of the manufacturing index, as the global semiconductor market has grown at an impressive rate,” it added.