Malaysia’s industrial production slips 3.3% in April, first decline since July 2021

[KUALA LUMPUR] Malaysia’s industrial production index (IPI) in April declined 3.3 per cent from a year earlier, the first contraction since July 2021, due to the fall from all sectors – manufacturing, mining and electricity, showed official data on Friday (June 9).

The factory output figure has reversed the growth of 3.1 per cent recorded in March. It is also below 13 economists’ forecasts of 2 per cent growth in a recent Reuters poll.

Although the decline in IPI exceeded market forecasts, MIDF Research said this is in line with their projection after factoring in weaker external demand as well as festive reasons – a temporary slowdown due to the effect of the Hari Raya holiday in April.

A report from the Department of Statistics Malaysia showed that the output from the manufacturing sector dropped 3 per cent year on year in April, after recording a growth of 4.1 per cent in March.

The main contributors are declining productions of petroleum, chemical, rubber and plastic products; transport equipment and other manufactures; and electronic products.

The mining sector dipped 4.9 per cent in April, dragged down by the Natural Gas as well as the Crude Oil and Condensate indexes, which fell 7.8 per cent and 0.9 per cent respectively.

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With declining output from the manufacturing and mining sector, the electricity sector fell 2 per cent in April.

From January to April, Malaysia’s IPI moderated to 1.3 per cent year on year.

MIDF noted that the production activity in the export-oriented sectors fell sharper at 3.6 per cent year on year in April.

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This is also the first contraction in the post-pandemic since mid-2020, following reduced output for rubber and wood products, furniture, electronics as well as oil and fats products.

The domestic-oriented sectors declined 2.1 per cent year on year in April, mainly due to lesser output for consumer-oriented products and construction-related items.

“The weakness in external demand will constrain the outlook for export-oriented sectors,” said MIDF in its report.

“On the other hand, the softer output of consumer products will be a temporary slowdown as domestic spending activities are expected to be supported by positive job market conditions and rising income.”