Malaysia’s factory output growth slips to 4.6% in October, below economists’ expectation

[KUALA LUMPUR] Malaysia’s industrial production index (IPI) growth for October moderated to 4.6 per cent year-on-year due to slower growth in mining and manufacturing sectors, ending four straight months of double-digit growth, according to latest figures from the Department of Statistics Malaysia (DOSM) on Monday (Dec 12).

The increase is lower than the 8.1 per cent growth that was projected by a group of 10 economists in a recent Reuters poll.

Malaysia’s IPI in October was lower than the 10.8 per cent growth in September. On a monthly comparison, IPI for October fell by 3.7 per cent in October, reversing from September’s expansion of 0.7 per cent.

DOSM said the mining and manufacturing activities continued to drive the growth, albeit at a slower pace. The mining sector led the way with an 8.6 per cent expansion (compared to 15 per cent growth in September), and the manufacturing sector slowed to 4.2 per cent growth (from 10.4 per cent growth in September). The electricity sector saw a decline of 1.9 per cent (down from growth of 4.1 per cent in September).

In the mining sector, the main contributors were natural gas index (11.4 per cent) and crude oil and condensate index (4.8 per cent.)

Within the manufacturing sector, the main contributors were electrical and electronics products (8.7 per cent), petroleum, chemical, rubber and plastic products (3.2 per cent) as well as non-metallic mineral products, basic metal and fabricated metal products (3 per cent).

The performance of the manufacturing sector was supported by both export-oriented industries (5 per cent) and domestic-oriented industries (2.5 per cent), said DOSM.

From January to October, Malaysia’s IPI increased 7.5 per cent year-on-year. This was supported by manufacturing, which rose 9.1 per cent, electricity (5.4 per cent) and mining (2.3 per cent).

In a research report on Dec 12, Barclays economists Brian Tan and Bum Ki Son expect the country’s manufacturing activity to soften, although the services sector would recover with the revival of international travel likely to offset the impact.

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They projected the positive output gap will likely be narrowed in the first quarter next year, but it is unclear whether the slowdown will have any impact on the central bank’s next policy meeting in March next year.

“We note the risk of yet another 25 basis-points hike in interest rate in March 2023. Rate increases of 50 basis points remain unlikely as we believe Bank Negara is more focused on domestic economic conditions rather than Fed’s or the ringgit movement,” they said in their report.