IPI growth to remain encouraging

KUALA LUMPUR: MIDF Research is maintaining Malaysia’s industrial production index (IPI) growth of 5.3% for 2017 as, it said, the encouraging trend is expected to continue in the coming months, on robust external trade performance and modest increases in commodity prices.

Malaysia’s industrial production rose by 6.1% year on year (yoy) in July 2017, beating market expectations of 5.1%. Manufacturing sales surged by 22.2% yoy in July, highest ever recorded.

“The upward trend in overall IPI performance is in tandem with upbeat performance of external trade activities which saw exports expanding by 30.9% yoy in July. The growth trend is also in line with the uptick manufacturing PMI figure in July. We opine continuous upbeat momentum in global demand remains as key driver boosting up Malaysia’s industrial activity,” MIDF said.

Moving forward, it foresees manufacturing sales continuing to expand but on a moderating tone due to an unfavourable base effect.

Manufacturing employment in July grew an annualised 2.9%, a record high.

“We opine the better uptick in both wages and employment in the manufacturing sector provides a bright outlook for economic activities in the second half of 2017. We also view the upward trend in the wage growth will positively contribute to domestic consumption.”

Due to strong export performances for the first half of 2017 and optimistic business sentiment, MIDF believes the upbeat momentum will remain, thus causing positive spillover effects on Malaysia’s industrial production.

“Hence, based on solid uptrend in trade activities and steady domestic consumption, we expect industrial production growth to hit 5.3% in 2017,” said MIDF.

Malaysia’s July manufacturing sales continued to record strong growth of 22.2%, rising to RM63.9 billion from RM52.3 billion reported a year ago, according to the Statistics Department.

The significant jump in sales value in July 2017 was due to the increase in electrical and electronics products (27.6%), petroleum, chemical, rubber and plastic products (24.0%) and nonmetallic mineral products, basic metal and fabricated metal products (10.2%).