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Malaysia industrial output likely to see improvement in May [11-07-2012]  
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Industrial production output in Malaysia could see an improvement in May, mostly on low base effects.

Economists polled by the Business Times expect the Industrial Production Index (IPI) - which measures changes to manufacturing, electricity and mining indices - to average 4.75 per cent from 3.0 per cent year-on-year in April.

The Statistics Department will release the details today.

Bank of America Merrill Lynch expects mining to show a small positive growth, after 19 months of contraction.

But manufacturing and electricity production are expected to continue to see weaker growth compared with April, it said.

Citi pointed out that the Malaysian Automotive Association showed slowing number of passenger cars in May to 10.4 per cent from 16.1 per cent in April.

DBS Bank economist Irvin Seah said output level has been falling for two consecutive months and that is more telling than the headline number as far as current economic conditions are concerned.

"In addition, exports sales has moderated to just a mere 0.8 per cent (seasonally adjusted) increase over the previous month, down from 1.5 per cent previously," he said, adding that a modest sequential expansion of about 0.5-1.0 per cent month-on-month can be expected.

But Seah warned that the risk on the industrial production figure is on the downside given the recent deterioration in the global growth outlook.

"Expect a return to a more sluggish production profile in the coming months when the low base effect fades off."

Economist Gundy Cahyadi of the OCBC Bank observed that the Malaysian economy continued to hinge on the external sector as seen by the sluggish IPI growth in the past few months.

Expansion in domestic-oriented industries has persistently surpassed that of export-oriented industries since the second half of 2011.

"The decent exports growth number in May is partly due to low base effects, but nevertheless, it would have buoyed up IPI growth figure for month as well."

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