Industrial production better than forecast

Kenanga Research said the 5.2% jump was driven by a recovery in the manufacture of goods for export.

PETALING JAYA: Malaysia’s industrial production index (IPI) climbed 5% in June 2024, following growth of 2.4% in the preceding month, sustaining positive momentum for six consecutive months.

The growth in factory output exceeded market expectations for 4% growth in June, according to a Reuters poll.

According to a statement by the Statistics Department, output growth in manufacturing led the way with an increase of 5.2%.

This was coupled with the turnaround to 4.9% in the production of the mining sector from a drop of 6.9% in May 2024. Meanwhile, the electricity sector rose by 3.5%.

“In comparison with the previous month, the IPI went up by 4.8% compared with 3.5% recorded in May 2024,” it added.

Explaining the improvement in manufacturing, Kenanga Research stated that the 5.2% jump was driven by a recovery in the manufacturing of goods for export.

Export-oriented manufacturing expanded by 5.4% reaching a 21-month high, driven by a rebound in the output of coke and refined petroleum products as well as a surge in the output of vegetable and animal oils and fats.

Kenanga Research expects the manufacturing sector’s output to continue its growth in the near term.

Th outlook is partly supported by anticipated recovery in export-oriented industries, led by a technology upcycle and ongoing multi-year government infrastructure projects.

While domestic-oriented manufacturing has slowed, Kenanga Research said growth is expected to remain stable for the rest of the year, supported by withdrawals from the Employees Provident Fund’s (EPF) flexible Account 3, increase in tourist arrivals, and a stable labour market.

Also sharing a bullish view on the manufacturing sector, RHB Research added that Malaysia is well-positioned to benefit from a rosier global economic outlook as it is an export-oriented economy.

“We remain positive about global demand for the remainder of the year and are bullish on Asean’s external environment in the third quarter of 2024 (3Q24), on assumptions of growth in the United States and China remaining resilient in the same period.

“As such, Malaysia’s growth will likely stay underpinned by external-facing industries, specifically its manufacturing and trade sectors,” the research house stated.

RHB Research said the IPI print for June 2024 reaffirmed its positive view for Malaysia’s gross domestic product (GDP) growth.

“Our expectations for Malaysia’s GDP to see acceleration in 2Q24 has materialised nicely, as indicated by our proprietary GDP leading index model pointing at growth of at least 5% year-on-year (y-o-y) and the growth is likely to be sustained at 5% y-o-y in 3Q24.

“We maintain Malaysia’s GDP forecast at 4.6% y-o-y for 2024, above the consensus estimate of 4.5% y-o-y, with the balance of risks tilted to the upside, given the stronger-than-expected 2Q24 advance GDP growth print,” the research house added.