Economy on track for firmer growth in 1Q

PETALING JAYA: Although the country has registered softer growth in its Industrial Production Index (IPI) in February, it has exceeded the consensus expectations of analysts.

The IPI, which tracked changes in industrial sectors moderated to 3.1% year-onyear (y-o-y) in February.

The slower manufacturing production had offset the stronger mining and electricity production, said the analysts.

They said this could be due to the reduced number of working hours due to the Chinese New Year holidays.

Moving forward, Kenanga Research said the manufacturing condition would improve further towards the end of the year, mainly driven by the expected upswing in the technology cycle and China’s gradual recovery.

“Nevertheless, the manufacturing condition could experience a sluggish recovery in the near term, as reflected by the latest Manufacturing Purchasing Managers’ Index (PMI) reading, which fell to 48.4 in March from 49.5 in February and remained at a contraction level since August 2022,” the research firm said in a report.

The PMI is an indicator of business activity, derived from the monthly surveys.

On expectations of the momentum picking up pace in the second half of 2024, Kenanga Research kept its manufacturing index forecast at 4.6% in 2024 (2023: 0.7%).

“Our assumption is also premised on the positive growth trajectory supported by higher demand from regional peers and better-than-anticipated performance among advanced economies.

“We project first quarter 2024 (1Q24) gross domestic product (GDP) growth to expand to 3.3% (4Q23: 3%) and maintain an overall growth forecast at 4.5% to 5% in 2024 (2023: 3.7%),” added the research house.

In its report, Hong Leong Investment Bank Research noted that the manufacturing PMI on the global front rose to 50.6 in March (February: 50.3) as new order inflows strengthened amid a broadening out of demand recovery from consumer goods to intermediate goods.

The demand increase was also aided by a near stabilisation of orders for global goods which observed the smallest decline in the ongoing 25-month trend of contraction.

“This signals further recovery for Malaysia’s manufacturing industry, coupled with support from continued domestic growth and the implementation of national master plans,” it added.

Meanwhile, Maybank Investment Bank Research said the economy is on track for firmer 1Q24 GDP growth.