Slower IPI growth seen for September

KUALA LUMPUR: Industrial output in September has likely grown at a slower pace of 5.51 per cent due to base effects.

The Statistics Department will release the data for the Industrial Production Index (IPI) as well as manufacturing sales today.

Moody’s Analytics expects the IPI number to cool in September, following a 6.8 per cent gain in August and six per cent rise in July.

“Forward indicators suggest cooling in the near term from foreign manufacturing demand, which should start to weigh on soaring exports.”

Standard Chartered Bank economist Edward Lee said although the headline industrial production decelerated from August, it will still be the third-highest year-on-year print this year.

“The mining sector is likely to have provided some support to the overall industrial sector as oil production was particularly low in September a year ago.” In the case of manufacturing, he said it will remain firm due to the strong electronics cycle although the base effect started to turn unfavourable for this sector from September.

Car production may pull the overall headline number slightly lower as activity eased by about eight per cent in September.

Moody’s also referred to the Nikkei-Markit manufacturing Purchasing Managers Index (PMI) which dipped to 49.9 in September from 50.4 in August, and below the neutral 50 that separates expansion from contraction.

The PMI report said new business was down for a fifth straight month amid weaker domestic and overseas demand. It was surprising that firms continued to increase employment with the lull in demand, according to the survey. If demand cools further, employment growth likely will not be maintained.