Malaysia’s December industrial production up 3%, below expectations

[KUALA LUMPUR] Malaysia’s industrial production index (IPI) increased 3 per cent in December from a year earlier, slower than analysts’ expectations due to easing manufacturing activities, according to government figures released on Tuesday (Feb 7).

This was lower than November’s growth of 4.8 per cent, and lower than the 4.4 per cent average expectation of 10 economists in a recent Reuters poll.

For the whole of 2022, Malaysia’s IPI narrowed slightly to 6.9 per cent, from 7.2 per cent in 2021. This was largely due to the manufacturing index (8.2 per cent), electricity index (4.5 per cent) and mining index (2.8 per cent).

The December IPI growth was led by increments of 4.1 per cent in the mining index and 3 per cent in the manufacturing index. The electricity index declined 1.1 per cent.

On a monthly comparison, industrial production fell by 2.3 per cent in December, largely reversing the 2.6 per cent expansion seen in November.

Giving his take on the data released by the Department of Statistics Malaysia, Barclays economist Brian Tan noted that Malaysia’s output level remains resilient and continues to register growth, compared to other markets in Asia such as South Korea, Taiwan and Thailand, which have all seen their industrial production shrink.

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He added that Malaysia’s tech segment continues to outperform its regional peers and is above trend levels in seasonally-adjusted terms despite external pressures.

“This likely reflects a favourable product mix and possibly some diversion of production to Malaysia from China due to earlier lockdowns,” said Tan in a note on Tuesday.

RHB Research economist Chin Yee Sian said the full-year growth was weaker than their projection of 7.3 per cent, with momentum of manufacturing activities staying flat in December.

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However, she said that consumer spending and trade performance turned out better than expected. As such, RHB Research has revised its 2022 forecast for Malaysia’s gross domestic product (GDP) growth in 2022 to 8.5 per cent, from an earlier projection of 8 per cent.

Barclays’ Tan expects Malaysia’s economy to expand by 9.5 per cent in 2022, with the momentum slowing down as manufacturing activity eases in 2023. He thinks GDP growth could slow to 4.5 per cent in 2023.

Bank Negara expects Malaysia’s economic growth to fall between 4 per cent and 5 per cent this year.

In another report released on Tuesday, Malaysia’s manufacturing sales for December 2022 came in at RM156.3 billion (S$48.2 billion), an 8.6 per cent increase year-on-year and lower than the 11.8 per cent recorded in November. In 2022, the sales value of the manufacturing sector surged nearly 16 per cent to RM1.8 trillion.