Factory output up more than expected in July
IPI gets strong boost from shipments of E&E products
PETALING JAYA: Malaysia’s factory output grew more than expected in July with a strong boost from shipments of electrical and electronics (E&E) as well as petroleum and petroleum-related products.
The provisional data from the Statistics Department showed that the industrial production index (IPI) that measures factory output rose 6.1% in July from the same month a year ago versus market expectations of a 5.1% increase.
The July IPI also registered the fastest pace of growth since last November. Compared to June, output was up 1.4%.
The Statistics Department said the IPI’s performance was driven by growth in the manufacturing, electricity and mining sectoral indices. The manufacturing index was up 8% from 4.7% in June, while the electricity index rose 7.9% from 2.1% and the mining index gained 0.2% from 2.4%.
The manufacturing index’s rise was contributed by E&E; food, beverage and tobacco; and petroleum, chemical, rubber and plastic products while the mining index was weighed down by the crude oil index that fell 3.9% but was supported by an increase of 5.5% in the natural gas index.
Malaysian exports surged 30.9% in July, beating market expectations with E&E, petroleum-related products and shipments of liquefied natural gas contributing to the exports growth.
Economists also expect the growth in exports to sustain into August, which the latest IPI data supports.
Citigroup Inc economist Kit Wei Zheng said in a report that the better-than-expected data, along with firmer bank loans and motor vehicle sales, suggested economic growth momentum remained robust in the early third quarter.
He pointed out that gross domestic product growth could pick up further from 5.8% year-on-year in the second quarter from Citigroup’s revised forecast of 5.5%.
“While E&E production shows some signs of moderation momentum as we had long expected, the pickup in food and beverage production, as well as transport/motor vehicles could be a sign that manufacturers are ramping up production in response (or in anticipation) of stronger domestic demand, especially private consumption,” Kit said.
He added that the Malaysian Automotive Association expected continued strength in car sales volumes in August.
He said this point to a pickup in discretionary spending on goods, which could complement the pickup in spending on necessities and discretionary services that have so far driven the consumer recovery.
In a separate announcement, the Statistics Department said July’s manufacturing sales recorded a strong 22.2% growth to RM63.9bil compared to a year ago on a 27.6% increase in E&E products, with petroleum, chemical, rubber and plastic product sales up 24% and non-metallic mineral products, basic metal and fabricated metal products up 10.2%.
The data also showed that there were 1.05 million people employed in the manufacturing sector, an increase of 2.9%. Salaries and wages paid rose 11.3% to RM3.52bil with average salaries and wages per employee of RM3,337.