KUALA LUMPUR, Feb 8 — MIDF Research expected Malaysia’s industrial production index (IPI) to grow at a moderate pace of 4.3 per cent this year, after the strong growth last year.
Earlier today, the Department of Statistics Malaysia (DoSM) announced that Malaysia’s industrial production continued to expand but at moderate growth of 5.8 per cent year-on-year (y-o-y) in December 2021 underpinned by increased manufacturing output and higher electricity generation.
For the whole year, it said IPI expanded by 7.4 per cent (2020: -4.4 per cent), still, a strong rebound led primarily by higher manufactured output.
In a note today, MIDF Research said the IPI moderation in December 2021 was in line with its expectation given the moderate exports growth and higher base, whereby the pace of growth was relatively slower than its estimate of 7.2 per cent y-o-y.
Nevertheless, it said the sustained IPI growth reflects increased business activities following the reopening of the economy.
The research house said that with the December 2021 numbers, the IPI rebounded to 6.9 per cent y-o-y in the fourth quarter of 2021 (4Q 2021) from -1.1 per cent y-o-y decline in Q3 2021 due to the lockdown and this indicated that the Malaysian economy had returned to the recovery path in the final quarter of 2021.
The value of manufacturing sales increased by 15.5 per cent y-o-y in December 2021, maintaining double-digit growth for four consecutive months and attributable to strong sales of refined petroleum, electrical and electronic (E&E) components and iron and steel products, among others.
“We expect the outlook for manufacturing sales will remain positive, driven by higher consumer spending, with no strict movement control on the people’s mobility and further reopening of the economy.
“With global demand for manufactured goods and E&E parts and components to continue growing, we expect the sustained growth in external demand will support Malaysia’s manufacturing output.
“The improved demand outlook on the back of increased domestic spending activity will also support the IPI outlook this year,” it said.
However, the research firm said looking at the recent decline in manufacturing Purchasing Managers’ Index (PMI) to 50.5 in January 2022 (December 2021: 52.8), local producers had highlighted challenges from supply constraints, raw material shortages and rising production costs.
“While the Omicron-linked Covid-19 infections in Malaysia have been on the rise recently, we opined that business activities will not be restricted as we foresee less need for another round of lockdown given the push for a booster vaccination and still low strain on the domestic healthcare system thus far.
“Despite challenges in the early part of the year due to the ongoing global pandemic and supply issues, we expect industrial output will continue to grow this year in anticipation of growing demand,” it added. — Bernama
