PETALING JAYA: Malaysia’s industrial production index (IPI) is expected to gather steam this year in line with better global manufacturing purchasing managers’ index (PMI) and sustained momentum in domestic demand.
IPI saw an expansion of 4.3% year-on-year (y-o-y) following a minor decline of 0.03% in December last year, marking the fastest growth since May 2023 during which IPI went up by 4.7% y-o-y.
On a month-on-month (m-o-m) basis, IPI rose by 2% in January against a 1.3% drop in the previous month.
The rebound in January’s IPI was largely reflected by the output rebound in the manufacturing sector which increased by 3.7% y-o-y compared with a 1.4% drop in December.
Moreover, the mining and electricity sectors also grew faster at 5% and 8.3% respectively. Export-oriented industries returned to positive growth of 1.6% and domestic-oriented industries strengthened to 8% in January.
HLIB Research said the country’s total production improved in January supported by longer working days in January this year compared with January 2023, which has shorter working days due to the earlier timing of the Lunar New Year.
“Meanwhile, global manufacturing PMI has crept back into expansionary territory in February at 50.3 (January: 50). Following this, the country’s manufacturing activity is also expected to gradually gain momentum as trade activity recovers.
“This is in line with the latest uptrend in manufacturing capacity utilisation rate in the fourth quarter of 2023 (4Q23): 79.8%; 3Q23: 79.4%),” the research house said in a report yesterday.
On this note, MIDF Research expects global production to improve further in February in line with better reading of global manufacturing PMI and signs of improved overseas demand.
“We foresee a turnaround in the global electrical and electronics (E&E) market due to the improvement in global semiconductor sales. This will support improved global IPI in 2024,” the research house said.
MIDF Research maintained its projection that domestic IPI would grow stronger at 3.7% this year compared with 1.1% last year.
“We remained optimistic given the continued rise in manufacturing PMI which indicates further stabilisation in domestic manufacturing activities in February. Overall, sustained growth in domestic demand will support output growth for the domestic-oriented sectors such as food and beverage, motor vehicles and transport equipment.
“Meanwhile, resource-based sectors such as chemicals and oil and gas as well as E&E sectors would increase production to cope with growing global demand,” the research house said.
Nevertheless, MIDF Research remained cautious that IPI growth this year could be constrained by downside risks such as weaker-than-expected economic growth in major economies such as China and the United States, and the potential disruptions to the global supply chain from the escalation in geopolitical tensions.
TA Research said the recovery in external demand coupled with global manufacturing activities would fortify local industrial production, leading to a growth target of 3.9%.
“The performance of the IPI may face challenges from prolonged or exacerbated overseas demand constraints, particularly concerning the sluggish economic recovery in China.”
