M’sia’s IPI growth beats market expectation as global demand remains intact
KUALA LUMPUR: Malaysia’s industrial production (IPI) expanded by 2.5 per cent y-o-y in November 2018, slightly above market estimates, despite of trade war and decline in business optimism, analysts say.
In a recent report, the research team at MIDF Amanah Investment Bank Bhd (MIDF Research) noted that moderating manufacturing growth drags overall IPI performance but Malaysia’s industrial production expands by 2.5 per cent y-o-y in November 2018, slightly above market estimates.
In addition, it pointed out that mining output shrank by 0.7 per cent y-o-y as a result of drop in global oil prices during the month.
“Nevertheless, overall IPI performance remains at healthy pace despite of trade war and decline in business optimism,” it opined.
“Moving forward, we foresee IPI performance to expand at steady pace in 2019 amid tapering trade tension, strong global demand, expected-improve business environment and gradual pick-up in global commodity prices and currencies,” it added.
As guided by the recent Business Tendency Survey data, MIDF Research believed the IPI growth will be growing between three to four per cent during the first half of 2019.
“Referring to the survey, services and manufacturing sectors are expected to continue to drive up Malaysia’s economy while mining sector is predicted to recover modestly early of this year.
“Among others, steady external trade performance, upbeat domestic demand and gradual increase in energy prices will boost up industrial activity in Malaysia.
“Lower business cost partly due to moderating inflation and stable retail fuel prices will provide additional boost for industrial production growth to hit 2.9 per cent in 2019.
“Nevertheless, headwinds from global trade tension and supply disruption for commodities based sectors could pose downside risk to the estimate,” it explained.