KUALA LUMPUR, Dec 10 — MIDF Research has maintained its forecast for Malaysia’s Industrial Production Index (IPI) to grow by 9 per cent this year consistent with its full-year projection.

It said local businesses have increased their production activities in view of the economic reopening and improving demand after the full lockdown earlier this year.

"The sustained growth in foreign demand also supported the stronger manufacturing output, particularly for electrical and electronics (E&E) and refined petroleum products.

"With Malaysia’s manufacturing Purchasing Managers’ Index (PMI) remaining above 50, we believe IPI growth will continue in November 2021,” it said in a note today.

According to a Department of Statistics Malaysia (DoSM) statement today, Malaysia’s IPI rose to 5.5 per cent in October 2021, driven by the manufacturing index, which saw an increase of 8.0 per cent in the month under review and supported by the electricity index, which climbed 4.1 per cent.

However, MIDF Research said rising production costs, high commodity prices and other supply constraints were risks that could affect production outlook, coupled with the emergence of Covid-19 variant, Omicron, which led to renewed concern that demand could weaken again if lockdowns were re-imposed.

Nevertheless, it expects upward momentum in manufacturing sales to continue in the coming months as the economic reopening would allow both consumers and businesses to increase their spending activities.

"As more restrictions on people’s mobility had been lifted, we foresee the domestic-oriented sectors will increase their output in view of improving domestic spending outlook,” it said.

Meanwhile, MIDF Research noted that the sustained growth in exports would also drive the production of trade-related products, particularly E&E. However, the challenges from global supply disruptions could affect the strength of domestic production activity.

"Looking at the improving auto production, this signals the supply tightness will gradually ease as businesses increase their production going forward, in anticipation of better demand in the coming months,” it said.

The research house expects global manufacturing activity to continue growing, given the sustained global PMI at 54.2 in November 2021, which reflects the continued expansion in manufacturing activities in the United States, Europe and Asian countries.

"Although the easing of Covid-19 restrictions and economic reopening allow more activities to pick up, the supply constraints and rising production costs remain key concerns that could affect the production outlook in many countries,” it said. — Bernama