Malaysian IPI to grow at modest pace

KUALA LUMPUR (Bernama) – MIDF Research expects the Industrial Production Index (IPI) to continue expanding at a modest pace in the second half of this year (2H19) as the global trade war remains a major downside risk to global trade activities and manufacturing production.

In a research note yesterday, the research house also said the manufacturing production, which has the highest weightage in the overall IPI index, would also contribute to the performance in the 2H19.

“Based on the latest macro trends and indicators, we maintain our forecast figure at 2.9 per cent for 2019.

“The manufacturing sector, which holds circa 70 per cent of IPI weight, is expected to perform modestly in 2H19 amid escalating trade tensions, and that could drag the overall IPI performance this year,” it said.

Earlier, the Department of Statistics Malaysia said the IPI grew 1.7 per cent year-on-year (y-o-y) in September 2019, slightly lower than the 1.9 per cent y-o-y growth recorded in August 2019.

For the first half of the year, the IPI growth averaged at 3.3 per cent y-o-y.

Manufacturing sales increased by 2.9 per cent y-o-y – its slowest expansion rate since October 2016.

However, MIDF Research expects manufacturing sales to improve in the fourth quarter amid the slight abatement in the United States-China trade tension, trivial improvement in commodity prices and strong domestic demand.

Meanwhile, RHB Research opined that the IPI growth would be better in the near-term following the latest Manufacturing Purchasing Managers’ Index, which rose to a six-month high in October.

“Looking ahead, we maintain our expectations for Malaysia’s economic growth to moderate to 4.5 per cent for 2019, and 4.3 per cent next year, as uncertainty continues to weigh on global trade activity and the economic outlook,” it added.