The nation’s industrial production expanded at a slightly faster pace in May, underpinned by a sharp rebound in mining activity and continued strength in export-oriented manufacturing, although domestic-oriented industries showed signs of moderation.
According to HLIB Research, the Industrial Production Index (IPI) grew 8.4% year-on-year in May 2026, up marginally from 8.2% in April but below the market consensus forecast of 9.4%.
The stronger headline performance was driven primarily by mining output, which surged 19.8% year-on-year compared with 6.8% growth in April. The expansion was led by a 37.4% jump in natural gas production, partly due to a low base effect from the corresponding period last year. Meanwhile, crude petroleum production declined at a slower pace of 0.7%.
However, manufacturing growth moderated to 6.6% from 8.3% previously, while electricity production slowed to 4.2% from 10.5% in April.
On a seasonally adjusted month-on-month basis, industrial production slipped 0.4%, reversing April’s 5.5% expansion as manufacturing and electricity output contracted.
Export manufacturing remains resilient
HLIB noted that export-oriented industries continued to underpin Malaysia’s manufacturing sector, with output accelerating to 8.9% year-on-year from 8.3% in April.
The electrical and electronics (E&E) industry remained the key growth engine, expanding 14.4%, compared with 12.8% previously, supported by an 85.1% surge in Malaysia’s domestic E&E exports during the month.
Refined petroleum products also recorded stronger growth, although gains were partially offset by weaker performances in rubber and plastics products, textiles, and wood and furniture-related manufacturing.
Domestic-oriented industries lose momentum
The research house said domestic-oriented manufacturing slowed considerably to 2.0% from 8.4% previously, reflecting softer activity across several industries.
Motor vehicle production fell 10.3% after growing 13.5% in April, largely due to a temporary plant maintenance shutdown by Perodua during the month.
Other sectors including food, beverages and tobacco, as well as non-metallic mineral, basic metal and fabricated metal products, also recorded slower growth.
HLIB believes the weakness in domestic-oriented industries was largely temporary and expects vehicle production to recover as manufacturing operations normalise.
Manufacturing outlook remains positive
Despite the moderation, HLIB remains optimistic about Malaysia’s manufacturing outlook, pointing to sustained momentum in export-oriented industries, particularly E&E.
The research house noted that the global manufacturing Purchasing Managers’ Index (PMI) remained in expansion territory at 52.2 in June, although business optimism eased to an eight-month low amid heightened geopolitical uncertainties.
“While domestic demand continues to be supported by government measures, the ongoing strength in the E&E sector points to sustained manufacturing and export activity,” HLIB said.
GDP forecast maintained
Although geopolitical risks remain elevated following renewed tensions involving the United States and Iran, HLIB believes Malaysia’s economic fundamentals remain resilient.
The firm expects temporary disruptions in domestic-oriented production to normalise in the coming months and maintains its 2026 gross domestic product (GDP) growth forecast at 4.7%, supported by continued strength in exports, manufacturing and resilient domestic demand.
