Malaysia factory output down 0.5% in September, worse than forecast
Tan Ai Leng
[KUALA LUMPUR] Malaysia’s industrial production fell for a second straight month in September, dipping by 0.5 per cent year on year, going by new figures released by the government on Tuesday (Nov 7).
The decline in the industrial production index (IPI) was worse than the 0.2 per cent fall predicted by a group of economists in a recent Reuters poll. In August, the country’s factory output decreased by 0.3 per cent year on year.
On a monthly basis, the IPI fell by 2.8 per cent in September. For the nine months from January to September 2023, it grew at a slower rate of 0.8 per cent, compared with the same period last year.
The Department of Statistics Malaysia (DOSM) said September’s decline was due to lower production from the mining sector, which fell 5.2 per cent year on year.
The manufacturing and electricity sectors fared better. Manufacturing, which fell for three months in a row from June to August, registered growth of 0.4 per cent in September. Electricity grew by 2.5 per cent. The expansion in the manufacturing sector was supported by the production of non-metallic minerals, basic metal and fabricated metal products.
In September, Malaysia’s manufacturing output was fuelled mainly by domestic-oriented industries, which grew 5.9 per cent year on year in September. Export-oriented industries remained sluggish, with output falling 2 per cent year on year.
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In view of the weaker-than-expected IPI reading, economists expect the country’s GDP growth to remain modest in the third quarter of this year.
Last month, the DOSM released an advance GDP growth estimate at 3.3 per cent, up from the 2.9 per cent expansion in the second quarter.
Barclays’ senior regional economist Brian Tan said the declining factory output may trigger a review of the advance GDP estimates to a “marginally lower” level, but noted that the third-quarter services volume indices, to be released on Thursday, will be key to watch.
Barclays’ earlier forecast that Malaysia will achieve a GDP growth of 4.3 per cent in 2023 and 4 per cent in 2024.
Based on the current IPI performance, MIDF Research expects moderate GDP growth in the third quarter, as external uncertainties remain the key downside risk to the country’s IPI growth outlook. MIDF maintained the IPI forecast at 1.6 per cent growth for 2023, slower than the 6.7 per cent growth last year.
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