Thursday, 13 July 2017

(NST) IPI grows 4.6pct in May, exceeds market expectations

KUALA LUMPUR: The Industrial Production Index (IPI) in May grew faster than market expectations underpinned by manufacturing activities in the electrical and electronics (E&E) sector.

The annualised 4.6 per cent growth was supported by the manufacturing index (7.3 per cent) and electricity index (2.5 per cent).

The mining index, which is also measured by the IPI, dipped by 2.3 per cent.

According to the Statistics Department, the manufacturing sector output mostly contributed by the electrical and electronics products (11.6 per cent); food, beverages and tobacco (12.9 per cent); and petroleum, chemical, rubber and plastic products (3.1 per cent).

In the case of the mining sector output, the contraction was due to the decrease of 5.4 per cent in crude oil index.

Alliance Bank noted the overall strength of the index, saying the three-month moving average has been rising faster by 4.4 per cent in May.

“E&E production continues to drive IPI growth suggesting a sustainable growth in exports of E&E products in the near term. “

The research house’s outlook on the manufacturing sector also remains positive.

“We reckon that the strong exports growth trend, as seen in recent months, could lead to a spillover effect to export oriented industries, such as the manufacturing sector.”

But it does not rule out downside risks to the manufacturing as indicated by the June Purchasing Managers’ Index which fell to a record low of 46.9 and this suggests normalisation of manufactured exports in the second half of 2017.

Rajiv Biswas, Asia Pacific Chief Economist, IHS Markit said the outlook for the Malaysian electronics sector remains positive in the second half of the year.

The latest IHS Markit Global Electronics PMI for June 2017 showed that global electronics output and new orders reached their highest levels since August 2014, signalling strong growth for the electronics industry in coming months.

The launches of the new Samsung S8 and Apple iPhone 8 smartphone models in 2017 is one of the key drivers of stronger global demand for semiconductors.

“Structural factors are also boosting global demand for electronics, such as the increasing amount of electronic components in autos as well as the rapid growth of industrial automation and robotics.”

Meanwhile, the Statistics Department said Malaysia’s May manufacturing sales continues to record a strong growth of 19.5 per cent, rising to RM61.9 billion as compared to RM51.8 billion reported a year ago.

Year-on-year, the significant increase in sales value was due to the increase in E&E (24 per cent), petroleum, chemical, rubber and plastic products (20.5 per cent), and non-metallic mineral products, basic metal and fabricated metal (13.3 per cent).

These three sub-sectors contributed 79.8 per cent to the sales value of the manufacturing sector.