Continued downtrend in IPI within expectation, says AmBank Research

AmBank Research forecast a negative growth of 2.0 — 3.0 per cent in its preliminary estimate for Q3 GDP. ― Picture by Yusof Mat Isa
AmBank Research forecast a negative growth of 2.0 — 3.0 per cent in its preliminary estimate for Q3 GDP. ― Picture by Yusof Mat Isa

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KUALA LUMPUR, Oct 13 — The Industrial Production Index’s (IPI) continued downtrend in August 2021 — albeit at a smaller contraction rate than in July — was within expectation, as extended lockdown to contain the Covid-19 and domestic noises continued weighed down overall business, investment and consumer confidence, said AmBank Research.

In a research note today, it said that while the economy would likely take a strong hit in the third quarter (Q3) of 2021, the downside to the overall performance would be contained by exports and firm commodity prices.

“Based on our monthly projection, August’s Gross Domestic Product (GDP) (growth) should be around -4.0 per cent from -8.4 per cent estimated in July,” the research house said.

AmBank Research forecast a negative growth of 2.0 — 3.0 per cent in its preliminary estimate for Q3 GDP.

“However, the fourth quarter (Q4) GDP should improve. The easing of restrictions as more than 90 per cent adults are fully vaccinated (as well as) greater stability on the domestic side while benefitting from global trade and firm commodity prices should lend support to growth. For the full year, the GDP is forecast to be around 3.0 — 3.5 per cent,” it said.

Meanwhile, PublicInvestment Bank said the worst is almost over for the IPI components, driven by the country’s transition towards Phase Four of the National Recovery Plan in October, a precursor for economic activity to rebound which is significant given the last full economic openings in March/April this year.

“This should bode well for manufacturing component given backlogs and pent-up demand especially with the upcoming holiday seasons.

“IPI components will also be supported by expansionary global fiscal strategies (until Q4 2021) and accommodative interest rate environment (until the first half of 2022) that will boost consumption activity and therefore demand for manufacturing and mining goods,” it said in its note today. — Bernama

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