KUALA LUMPUR: January's industrial production index (IPI) growth which was well below expectations contrasted with the trade data which was a jump in manufactured export volume growth in January.
Nomura Global Markets Research said on Tuesday the IPI growth was surprisingly stable in January, only edging up to 3.0% on-year from 2.9% in December, despite a favourable base effect from the lunar new year holiday effect.
“This was well below expectations (Consensus: 6.8%; Nomura: 7%). Official seasonally adjusted data also show a 1.0% on-month decline in January after December’s 0.2% decline,” it said.
Nomura Research said the main drag was manufacturing IP growth which fell to 4.8% on-year in January from 5.3% in December; growth in the electrical and electronics segment was broadly stable at 4.0%, edging down from 4.1% in December.
“Overall, this supports our forecast for GDP growth to moderate to a still-solid 5.5% in 2018 from 5.9% in 2017. This should further reduce the need for more rate hikes and we continue to expect Bank Negara Malaysia (BNM) to leave its policy rate unchanged for the rest of the year,” it said.
Nomura Research said the window for further rate hikes is closing as we expect the general election to be called in late April or early May, and fiscal tightening in H2.
In its March policy statement, the research house pointed out Bank Negara no longer described its stance as “accommodative” as it did in January, suggesting it saw limited room for another hike, in line with its view.