Malaysia’s industrial production surprises with 3.6% growth in February

[KUALA LUMPUR] Malaysia’s industrial production index (IPI) rose 3.6 per cent year on year in February, after recording a modest growth of 1.8 per cent in January 2023, according to figures released by the Department of Statistics Malaysia (DOSM) on Tuesday (April 11).

The growth has exceeded the 2.7 per cent average expectation of 12 economists in a Reuters poll.

The expansion of factory output in February was led by the increment of 4.9 per cent in the manufacturing sector and 1.1 per cent in the electricity sector. The mining sector, however, dropped 0.5 per cent.

DOSM chief statistician Mohd Uzir Mahidin said electrical and electronics products spearheaded manufacturing output, followed by food, beverages and tobacco products.

The mining sector output weakened in February, mainly affected by the fall in crude oil and condensate index (0.3 per cent) and natural gas index (0.5 per cent).

On a monthly basis, IPI rose 4.9 per cent in February, reversing the 2.4 per cent decline in January.

In a note on Tuesday, Barclays’ senior regional economist Brian Tan said Malaysia’s output levels remain relatively resilient, compared with negative February readings in South Korea, Taiwan and Thailand.

Nevertheless, Tan said Malaysia’s gross domestic product growth is set to moderate to 5.3 per cent year on year in the first quarter 2023 from 7 per cent in the fourth quarter last year due to a high base effect.

“Mining activity likely weakened visibly in the first quarter this year, and we expect an unfavourable base effect to weigh on the services sector in year on year terms, even as agriculture and manufacturing remained resilient,” he added.

Growth in the manufacturing sector in February was driven by strong domestic-oriented industries, which expanded by 7 per cent, supported by the manufacturing of food processing and fabricated metal products.

Export-oriented industries rose 3.9 per cent in February, with growth propelled by the manufacture of computer, electronics and optical products; vegetable and animal oil and fats, as well as refined petroleum products.

In a separate report released by DOSM on Tuesday, Malaysia’s manufacturing sales value grew 10.3 per cent year on year to RM145.2 billion (S$44 billion), mainly driven by food, beverages and tobacco products; electrical and electronics products; and petroleum, chemical, rubber and plastic products.