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Industrial production in August contracts slightly [12-10-2012]  
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Industrial production in Malaysia shrank by 0.7 per cent in August, dragged by the slower activities in the manufacturing sector on the back of slower external demand.

The rate was slower than market expectations and economists said it was partly due to base effect.

Bank of America Merrill Lynch economist Dr Chua Hak Bin said it was the first contraction in industrial output since July last year.

The fall was led by manufacturing (-1.8 per cent), while electricity (2.7 per cent) and mining expanded (1.6 per cent).


The poor IP reading, he remarked, is consistent with exports, which fell 4.5 per cent in August from a year ago, the sharpest contraction since September 2009.

Credit Suisse economist Santitarn Sathirathai expects industrial production to pick up in the fourth quarter.

The three month-on-month industrial output growth indicates tentative signs of stablisation, he said.

"We think the trend should improve in the fourth quarter, reflecting a pick-up in global trade cycle and stronger domestic demand as the government's pump-priming efforts intensify ahead of the general election deadline in April next year," he said.

The third quarter is likely to be the softest point in terms of sequential GDP growth this year.

CIMB Investment Bank chief economist Lee Heng Guie said the drop in IPI coupled with the two straight months of export contraction in July-August confirms a moderation of economic growth in the third quarter.

"We expect continued slow IP expansion in the months ahead, going by the less promising readings for the global OECD leading index and PMI (Purchasing Managers Index)."

Domestic sources of strength - consumer spending and domestic investment - should provide buffer against external pressures, he said.

Meanwhile, the Statistics Department said the manufacturing sector posted a growth of 1.8 per cent growth to record RM51.0 billion sales in August compared to a year ago.

Sales were led by semiconductor devices, television and radio transmitters and apparatus for line telephony and line telegraph, basic iron and steel products and rubber gloves.

Source:BUSINESS TIMES
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