Malaysia’s industrial production growth slows to 4.1% in May, below forecasts

​​​​MALAYSIA’S industrial production growth moderated to 4.1 per cent year on year in May 2022, slower than April’s 4.6 per cent rate and below economists’ expectations of 6.2 per cent.

According to a report from the Department of Statistics Malaysia (DOSM) on Friday (Jul 8), Industrial Production Index (IPI) growth in May was mainly driven by the electrical and electronics as well as transport-related industries.

“All industries in the manufacturing sector saw a positive growth, except for petroleum, chemical, rubber and plastic industries, which shrank 1.8 per cent compared to May 2021,” said DOSM.

The manufacturing sector grew 6.9 per cent. Within this, the electrical and electronics sector recorded 15.5 per cent growth, while transport equipment and related manufacturers recorded 12.4 per cent growth.

The electricity sector also recorded growth of 2.8 per cent. In contrast, the mining sector contracted 4.9 per cent in May 2022, mainly due to lower production from crude oil and condensate industries (-6.7 per cent) and natural gas (-3.6 per cent).

A Barclays report described May’s IPI figure as a “downside surprise” compared to the 6.2 per cent estimate in a Bloomberg poll of economists. But the analysts remained upbeat, saying: “The reopening gains and favourable terms of trade should continue to support the growth recovery in the coming months.”

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In a separate report by DOSM on Thursday, Malaysia’s full reopening of economic and social activities saw the labour force participation rate increase marginally to 69.5 per cent, with the labour force standing at 16.54 million in May, up from 16.5 million persons in April 2022. The unemployment rate remained at 3.9 per cent.

The record hiring was propelled by continuing recruitment in almost all economic sectors – except the mining and quarrying sectors, which recorded a decline in employment for the 22^nd straight month, said a report by UOB research on Thursday.

The services sector, which makes up about 58 per cent of Malaysia’s gross domestic product, remained the key driver of overall employment.

Although the labour market has shown persistent improvement, DOSM noted that the escalating commodity prices, supply chain disruptions and labour shortages have indirectly affected Malaysia’s economic development, especially the manufacturing sector.