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May industrial production growth exceeds expectations [12-07-2013]  
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Malaysia’s industrial production index (IP) rose 3.4% in May from a year ago, exceeding economist expectations of a 2% growth.

Citigroup Inc economist Kit Wei Zheng, who has maintained gross domestic product (GDP) growth at 5.2% year-on-year, said in a report that the April-to-May data continued to point to a pick-up in second-quarter GDP.

“Manufacturing appears on track to provide a sequential boost – April-to-May seasonally-adjusted manufacturing industrial production levels were 3.4% above their first-quarter average – while mining is now above water at 0.3% above the first quarter,” he pointed out.

Kit said that April-to-May electricity industrial production levels were 0.9% above the first quarter, hinting at still resilient domestic demand, with consumption goods imports surging in April-to-May, while capital goods imports remained elevated.

“With election uncertainties behind us, the implementation of approved projects could keep investment growth robust in the second half. Together with rising intermediate goods imports, this could place some near-term pressure on the current account, and net exports would likely remain a drag until exports picked up, likely also in the second half,” he said,

Meanwhile, Alliance Research chief economist Manokaran Mottain cautioned that if recovery in overseas demand failed to materialise in the short term, recent gains in manufacturing output might likely end up as stocks, thus dragging down the overall GDP growth.

“Going by the recent data on production and export activities, we are now projecting a GDP growth of 4.7% in the second quarter, rebounding from +4.1% in the first quarter. With an anticipated recovery in the second half, we maintain our full-year GDP forecast at 4.8% in 2013,” he said.

The Statistics Department said yesterday the increase was contributed by a 3.1% growth in the manufacturing index, mining (4.1%) and electricity (4.8%).

The department said the IPI in April 2013 had been revised to a positive growth of 4.6% year-on-year, instead of 4.7%.

“In seasonally-adjusted terms, the IPI in May 2013 decreased by 0.2% month-on-month. The decrease was particularly due to the decrease of the manufacturing index and electricity index by 1.1% and 1.0%, respectively. The mining index recorded an increase of 2.9%,” it said.

The department said the manufacturing output for May rose 3.1% year-on-year. Output for April increased by a revised 5.9%.

The major sub-sectors which recorded increases were petroleum, chemical, rubber and plastic products (4.2%); non-metallic mineral products, basic metal and fabricated metal products (4.8%); transport equipment and other manufactures (17.3%).

It said on a seasonally-adjusted month-on-month basis, manufacturing output fell 1.1% in May 2013.

The mining sector recorded a 4.1% increase in May 2013 year-on-year due to a higher crude oil index (0.7%) and natural gas index (11.3%).

When compared with the previous month of April, the seasonally-adjusted output for the mining sector increased by 2.9%.

As for electricity, its output increased 4.8% in May 2013 year-on-year. In seasonally-adjusted terms, electricity output dropped 1% from April.

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