RHB Research: Malaysia’s IPI to stabilise further in 4Q

RHB Research expects Malaysia’s Industrial Production Index (IPI) to stabilise further in the fourth quarter (4Q) of 2023.

This is in tandem with gradual improvement in trade activities and external demand, in anticipation of higher demand from selected trade partners such as the United States and Asean economies, said RHB Research in a note.

“We remain cautious on the downside risks emanating from global technology downcycle and China’s weak economic growth prospect.

“The IPI momentum improved for July on better performance in domestic and export-oriented industries with July’s IPI rebounding by 0.7 per cent year-on-year (y-o-y) versus June’s print of -2.2 per cent y-o-y, better than Bloomberg’s consensus estimate of -0.2 per cent y-o-y,” it said.

RHB Research also noted that the mining and electricity sub-sectors registered positive growth of 4.2 per cent y-o-y and 1.5 per cent y-o-y, respectively.

Meanwhile, the manufacturing sector decreased by a smaller margin of 0.2 per cent y-o-y.

“We expect the manufacturing activities to show more signs of bottoming out by end-3Q 2023.

“We remain cautious on the downside risks emanating from global technology downcycle and weak China’s economic growth prospect,” It said.

Meanwhile, Ambank Research viewed that the slower production in the manufacturing sector is expected to persist at the moment, as conditions from the external fronts have not shown any sign of improvement yet.

It also said that despite a slight improvement in Malaysia’s IPI, which grew by 0.7 per cent in July, the manufacturing sector contracted by 0.2 per cent.