Malaysia’s March industrial production up 2.4%, lower than forecast

Kuala Lumpur

MALAYSIA’S industrial production index (IPI) rose 2.4 per cent in March from the year before, driven by higher output from the mining and electricity sectors, said the Department of Statistics Malaysia (DOSM) on Friday (May 10).

The growth, slower than the 3.1 per cent recorded in February, also fell short of the 2.5 per cent growth forecast by 15 economists in a recent Reuters poll.

A report by DOSM showed that the output from the mining sector accelerated by 4.9 per cent year on year in March, compared to 8.1 per cent on-year growth in February.

The growth was bolstered by an increase of 8.9 per cent in natural gas production, which offset a 0.7 per cent dip in crude oil output.

The manufacturing sector grew by 1.3 per cent.

This was slightly higher than the 1.2 per cent growth in February, with increased production of non-metallic minerals, basic metals and fabricated metal products, as well as wood, furniture, paper and printing products.

The output of the transport equipment segment declined 4.4 per cent in March, weighing down the overall growth of the manufacturing sector.

The electricity sector’s output expanded by 7.8 per cent in March, down from the 10.9 per cent growth in the previous month, with the growth driven by increased output from the mining and manufacturing sectors.

Economists optimistic

Despite the slower growth in industrial production, economists are optimistic about Malaysia’s economic prospects. They cited the improvement in external demand and robust tourism activities as key factors that could boost industrial production.

RHB Research economist Chin Yee Sian said industrial production and export momentum have gained pace in recent months, driven by higher outbound shipments of electronic and petroleum-based products.

“Private consumption is expected to be supported by healthy labour market demand conditions,” she added.

The S&P Global Malaysia Manufacturing Purchasing Managers’ Index (PMI) in April rose to 49, from 48.4 in March, indicating a slight improvement in Malaysia’s manufacturing activity.

Usamah Bhatti, an economist at S&P Global Market Intelligence, said that while demand in the Malaysian manufacturing sector remained subdued at the beginning of the second quarter of 2024, the data suggest a modest upward trend consistent with official growth statistics.

“The outlook towards output over the coming year also remained positive in April, though the overall degree of confidence waned to the lowest for eight months.

“Many firms expressed uncertainty about the timing and pace of demand recovery, with downside risks linked to a sluggish global economy,” she added.

DOSM chief statistician Mohd Uzir Mahidin said the expansion of the manufacturing sector was driven by exportoriented industries, particularly those with increasing orders for computer, electronics and optical products, as well as coke and refined petroleum products.

Export-oriented industries

In March, output from export-oriented industries rebounded 0.5 per cent, from a 0.1 per cent year-on-year decline in February.

Domestic-oriented industries grew 3.1 per cent, but lower than the 3.8 per cent year-on-year growth in February, with gains in the production of fabricated metal products, non-metallic mineral products, as well as food processing products.

From January to March, Malaysia’s IPI grew by 3.3 per cent, an improvement from the 2.7 per cent expansion registered during the corresponding quarter last year.