Industrial output up in August
MIDF Research: Exports in August expanded by 21.5%
PETALING JAYA: Industrial output in August expanded at its fastest pace in more than two years, boosted by a sharp increase in natural gas production and steady growth in the manufacturing sector.
“The upward trend in the overall industrial production index (IPI) performance is in tandem with the upbeat performance of external trade activities which saw exports expanding by 21.5% in August,” MIDF Research said.
The firm expects strong global demand to keep factory output on a steady growth path for the rest of the year.
“The encouraging trend of the IPI growth is expected to continue in the upcoming months, given the continued robust external trade performance and the modest increase in commodity prices will boost industrial activity in Malaysia,” it said.
The IPI grew 6.8% in August, the Statistics Department said yesterday, accelerating from the 6.1% growth recorded in July.
“Industrial expansion in August was supported by positive growth in all indices, namely, manufacturing (7.6%), mining (5.3%) and electricity (3.0%).
“The mining sector’s output increased strongly by 5.3% compared to 0.2% in July, mainly due to an increase of 14.6% in the index for natural gas. However, the index for crude oil fell by 1.6% in August,” the Statistics Department said.
Despite registering a positive expansion in August, the manufacturing sector’s growth was margin- ally lower than 8% in July. The sector’s production momentum seems to be slightly slowing, as the Nikkei Malaysia Manufacturing Purchasing Managers’ Index (PMI) also dropped to 49.9 in September from 50.4 a month earlier.
This was on the back of reduced new orders in the manufacturing sector in September.
Similarly, the electricity sector also recorded a slower growth in August, expanding by 3% compared to 7.9% growth in July.
Following the strong industrial production performance, RHB Research has indicated that the country’s gross domestic product (GDP) growth may offer a surprise on the upside in the third quarter.
“The stronger advance in July-August’s industrial activities indicates the third-quarter’s real GDP growth may surprise us on the upside, which we currently project to expand by 5.3% year-on-year (y-o-y) as compared to 5.8% in the second quarter.
“On a cumulative basis, Malaysia’s IPI grew by 4.8% y-o-y in the January-August period, strengthening from the 3.5% recorded in the corresponding period last year.
“We expect Malaysia’s real GDP to grow by 5.3% in 2017, before inching up to 5.4% for 2018 from 4.2% in 2016. The stronger growth in 2018 would likely be supported by a stronger increase in exports, pickup in domestic demand and modest increase in public spending and investments.”
Meanwhile, Citi Research has projected that the country’s GDP growth in the third quarter may even exceed 6%, given the stronger industrial production in August.
“Alongside positive incoming data from agriculture and wholesale or retail sales, GDP growth in the third quarter may be on track to exceed 6%.
“With a GDP growth of 5.7% in the first half, risks to our baseline 2017 forecast of 5.5% are clearly tilted towards the upside. We would not be surprised if the Oct 27 budget announcement raises 2017 forecasts to 5%-6% from 4%-5% previously,” said the research house.
By GANESHWARAN KANA firstname.lastname@example.org Gas boost: Aerial view of Petronas’ regassification terminal off Melaka. August output was boosted by a sharp increase in natural gas production.