MIDF Amanah: Industrial Production Index jumps 50.1pc in April due to low base effect

Workers are pictured at their stations at the Toshiba Transmission & Distribution Systems in Petaling Jaya June 1, 2021. — Picture by Firdaus Latif
Workers are pictured at their stations at the Toshiba Transmission & Distribution Systems in Petaling Jaya June 1, 2021. — Picture by Firdaus Latif

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KUALA LUMPUR, June 11 — The growth in the Industrial Production Index (IPI) for April 2021 which accelerated to 50.1 per cent year-on-year (y-o-y) was due to the low base effect, underpinned by the double-digit growth in all sectors, said MIDF Amanah Investment Bank Bhd.

The bank said although the growth rate was somewhat weaker than its expectation, the trend was in line with the forecast for an accelerated IPI growth y-o-y due to the low base effect since the IPI declined sharply in April 2020 following the imposition of the movement control order (MCO) 1.0.

“We maintained our projection that full-year IPI will rebound and grow by 12.8 per cent this year (2020: -4.4 per cent), and we also take into account that IPI growth will be stronger in second quarter 2021 due to the base effect.

“Nevertheless, we foresee the pace of growth to moderate going forward due to fading base effect,” it said in a note today.

MIDF Amanah noted that despite the upside from the low base, production activities in the middle of the year are expected to be impacted by the imposition of MCO 3.0 and the full lockdown, which saw the temporary closure of non-essential sectors and tighter restrictions on people’s mobility and social activities.

However, it said the MCO 3.0’s impact is not expected to be as severe as MCO 1.0 last year since essential sectors are allowed to operate, including businesses in the essential sector supply chain.

The eventual reopening of the economy will see businesses resuming operations in the latter part of the year, but for now, the local pandemic situation remains a key concern because Covid-19 cases continue to increase at a four-digit pace, said MIDF Amanah.

“If the full lockdown is to be extended, we are concerned that the prolonged restrictions could affect production activities, especially for the domestic-oriented industries.

“On the other hand, we believe the outlook for the export-oriented industries remain encouraging, buoyed by growing external demand and continued recovery in major trading partners,” it added. — Bernama

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