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NEWS UPDATES Asean Affairs    13 August  2012

Malaysia’s factory output of June lower than expected


Factory output as measured by the Industrial Production Index (IPI) came in lower than expected as manufacturing activity slowed on lower external demand.

According to the Statistics Department, the IPI for June grew 3.7 per cent year-on-year against the 4.8 per cent median expectations in a Bloomberg survey of economists.

May's IPI was revised to a 7.8 per cent growth, from 7.6 per cent previously.

For the second quarter ended June 30, IPI gained 4.9 per cent year-on-year but declined 0.1 per cent quarter-on-quarter.

In June, manufacturing output registered a growth of 4.8 per cent while the mining sector's output recorded a a marginal decrease of 0.3 per cent and the electricity output saw an increase of 5.9 per cent.

Alliance Research chief economist Manokaran Mottain said the moderating trend was not a surprise.

“The June data showed that the manufacturing activity is still on a low gear, as it has posted a marginal drop of 0.4 per cent month-on-month. Index-wise, the manufacturing sector is still weak compared to March reading (122.5 in May vs 125.3 in March),” he noted in a report.

Manokaran also said the results was in line with recent trade data that showed Malaysia's export growth had eased from a three-month high of 6.7 per cent in May, to 5.4 per cent in June.

“Overall, recent poor PMI (Purchasing Managers Index) data continue to underscore a slowdown in the third quarter imminently, before a potential recovery by the final quarter.”

He opined that given a weak global growth and a potential weakening situation in the euro-zone, Asia's manufacturing sector may remain subdued for the rest of the year.

“Export demand will be weakened further by poor PMI data recently in major industrial and regional economies.”

The research unit also raised its growth estimate for the second quarter.

“Real gross domestic product (GDP) may have grown faster than initially expected by 4.5 per cent, underscoring a better-than-expected export performance. In comparison, this is still a growth moderation from the 4.7 per cent growth seen in 1Q12.”

Manokaran said he was maintaining a full-year economic growth target of 4.2 per cent this year for Malaysia, with the third quarter bottoming out amidst the search for more clarity in euro-zone.

In a separate release, data showed that manufacturing sales for June grew 6.3 per cent year-on-year to 52.8 billion ringgit (US$16.99 billion), while on a month-on-month basis, sales increased by 1.6 per cent.

Manufacturing sales was revised downwards to a gain of 8.8 per cent in May, from 10 per cent previously.

For the first half of 2012, the sales value of the manufacturing sector posted a 6.7 per cent year-on-year growth (19.5 billion ringgit) to hit 310.7 billion ringgit.

Bank Islam Malaysia Bhd chief economist Azrul Azwar noted that in June, Malaysia's imports of intermediate goods had decreased 5.3 per cent year-on-year to 31.7 billion ringgit.

“This implies that we could see further weakness in industrial output especially in the manufacturing sector, over the next few months,” said Azrul, who also maintained a full-year economic growth target of 4.2 per cent this year.

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