PETALING JAYA: Malaysia’s industrial production is poised for continued improvement after rising for the sixth consecutive month in June this year.
The positive outlook for the country’s industrial production index (IPI) is underpinned by the recovery in both domestic and external demand, said Public Investment Bank (PIB) Research in its report yesterday.
“Looking ahead to the remaining months of 2024, we expect the industrial sector to maintain its growth trajectory, supported by sustained domestic demand and recovery in global markets,” the research house wrote. “However, the sector’s outlook remains contingent on external demand dynamics, which pose a significant risk to Malaysia’s industrial performance amid ongoing global uncertainties,” it added.
Malaysia’s IPI growth accelerated in June to 5% year-on-year (y-o-y) from 2.4% y-o-y in the preceding month, marking its sixth consecutive month of increase.
The June reading was slightly above market expectations of 4.7% y-o-y, with growth by stronger output across the board, comprising the manufacturing, mining and electricity sectors.
On a cumulative basis, the IPI rose 3.9% y-o-y for the first half of 2024.
“The rise in manufacturing production in June was driven by both domestic and export-oriented industries, reflecting a balanced contribution to the sector’s growth,” PIB Research said.
“We project Malaysia’s exports of goods and services to grow by 5.4% y-o-y in 2024, underpinned by a recovery in global demand and a robust electronics sector,” it added.Echoing the positive take, MIDF Research maintained its overall 2024 IPI growth forecast at 4.2% y-o-y, accelerating from 0.7% y-o-y in 2023.
“We continue to expect the recovery in external demand will support higher production of various export products, including electrical and electronics products,” the research house explained.
“Production of domestic-oriented products will also increase on the back of growing domestic consumption,” it added.
On the other hand, it cautioned that several downside risks such as higher inflation outlook could hurt consumer sentiment and their spending plans, while the external sector could be hit by significant reduction in overseas demand, given the recent concerns over weak growth in China and recession risk in the United States.
“In addition, we are monitoring closely the ongoing geopolitical conflicts which could disrupt world trade flow and the global supply chain,” MIDF Research said.
Hong Leong Investment Bank Research noted that global manufacturing Purchasing Managers Index (PMI) fell into contractionary territory in July at 49.7 from the expansionary territory at 50.8 in June, amid a decline in new orders and supply chain disruptions.
“Despite the setback, we continue to expect Malaysia’s manufacturing activity to remain expansionary, benefiting from low base effect and sustained growth in domestic-oriented production amid a continued rise in domestic spending,” it said.
Meanwhile, TA Research maintained its 2024 IPI growth forecast at 3.9% y-o-y.
“The prospect of attaining robust overall output figures is poised to present a considerable challenge in the short term.
“This challenge predominantly emanates from the recent moderation in the PMI, which has indicated a faster deterioration in the manufacturing-sector’s operating conditions compared to the previous month,” it said. “In July, the domestic market showed weakness, with new orders easing for the first time in three months,” the research house added.
