Manufacturing sector expands for 2nd month

“We expect industrial production to pick up in the coming months from robust external demand for electronics, and from a rise in oil prices, ” Moody’s Analytics economist Denise Cheok said in a statement yesterday.

PETALING JAYA: Malaysia’s manufacturing sector expanded for the second month in a row in January 2021, despite the domestic movement control order (MCO) and Moody’s Analytics expects it to pick up in the coming months.

“We expect industrial production to pick up in the coming months from robust external demand for electronics, and from a rise in oil prices, ” its economist Denise Cheok said in a statement yesterday.

She said although restrictions were not as strict as the first round last March, strong export growth more than offset any decline in domestic demand.

“Malaysia has benefited from the global shortage of semiconductors in the automobile sector, together with other manufacturing powerhouses in the region.

“Production of rubber products boosted the manufacturing index as well, as global demand for medical rubber gloves continue to thrive amid the pandemic, ” she said.

Earlier, chief statistician Datuk Seri Dr Mohd Uzir Mahidin said the industrial production index (IPI) grew by 1.2% in January from a year ago, driven by the manufacturing index with an increase of 3.5%. However, the mining and electricity indices dropped 4.5% and 4.6%.

Mohd Uzir said the manufacturing sector output based on year-on-year comparison rose by 3.5% in January after recording a growth of 4.1% in December 2020.

“The major sub-sectors contributing to the growth in manufacturing sector in January 2021 were electrical and electronics products (7.9%); petroleum, chemical, rubber and plastic products (4.5%) and wood products, furniture, paper products and printing (2.4%).

“The export-oriented industries drove the growth of the manufacturing sector by 4.6% while domestic-oriented industries increased by 1.5%, ” he said.

The mining sector output dropped 4.5% due to the decrease in crude oil and condensate index (-9.4%) and natural gas index (-0.5%). The electricity sector output contracted 4.6% in January 2021 as compared to the same month of the previous year.

Elaborating on the IPI data, Cheok said the mining sector improved in monthly terms, with crude oil prices steadily climbing from supply cuts by Opec+, and optimism from vaccine rollouts.

January’s 4.5% yearly decline is a marked improvement from the double-digit slump at the height of the pandemic. Oil prices are likely to trend upwards this year, although uneven distribution of vaccines globally might slow down the recovery in the tourism industry.

Malaysia lifted strict MCOs from the states of Kuala Lumpur, Selangor, Johor and Penang in early March, with most of the country currently under the less stringent conditional movement control orders. Travel between districts will now be allowed, and more businesses will be permitted to resume operations.

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