Malaysia’s IPI growth accelerated to +13.6%yoy, the fastest in 15 months, this was better than MIDF’s estimate mainly because of the stronger growth in manufacturing output (+14.9%yoy), in line with the stronger export performance. Furthermore, the mining (+8%yoy) and electricity (+10%yoy) sectors also registered robust output growth, driven by higher crude oil & LNG output and stronger electricity consumption.
The pick-up in IPI growth signals stronger production activities in July-August 2022, indicative of robust GDP growth in 3QCY22. This also showed business activities including production continued to grow on the back of increasing demand, both domestic and external.
Although the Aug-22 IPI growth was better than expected, MIDF keeps the projection for IPI growth this year at 6%. The research house also foresees IPI will record a more moderate growth in the latter part of the year due to the diminishing low base effect.
In particular, Malaysia’s manufacturing PMI recently fell to 49.1 in Sep-22 (Aug-22: 50.3) as local firms began to slow production and purchases on the back of softer demand. Thus far, there is resilience in Malaysia’s economy as economic activities continued to grow supported by both domestic spending as well as sustained expansion in external demand. In other words, there may be an upside surprise to IPI and growth outlook in the near term if demand from within and outside Malaysia continued to grow robustly.
Nevertheless, as an open economy, MIDF believes Malaysia will likely be impacted by any significant slowdown in international trade and global production activities
