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September IPI advances 4.9% [09-11-2012]  
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The industrial production index (IPI), which measures factory output, rose 4.9% year-on-year in September, supported by an increase in activity in the manufacturing sector.

The manufacturing index rose 5.2% while the mining and electricity indices gained 3.6% and 5.9% respectively.

For the third quarter, the IPI increased 2.4% compared with the same quarter a year ago.

The expansion was unexpected as economists forecasted a marginal rise of 0.6%.

August’s factory output was revised to a 0.2% decline year-on-year from a 0.7% contraction.

Seasonally adjusted, the IPI rose by 5.8% in September which was contributed by the manufacturing index and electricity index of 8.9% and 6% respectively.

The mining index registered a decrease by 3.7%.

Citi AP Economics Research analyst Zheng Kit Wei said: “We had previously expected an export snapback in the fourth quarter this year or next – today’s data could hint at its start.”

“However, given the continued weakness in the external environment and the US fiscal cliff weighing on sentiment, any pick up will likely be modest and short-lived at best, more so since Malaysia is less exposed to ‘star’ product segments like tablets and smartphones that have lifted tech exports of North Asian counterparts.”

He added that there were already signs of fading in technology momentum.

Zheng said while growth could slow further to around 4% to 5% in the fourth quarter on base effects, Citi maintained forecast of 5% gross domestic product (GDP) growth for 2012 as the latest rounds of civil servant bonuses would likely result in upward revisions of the first half of 2012 GDP.

RHB Research noted in a report that “the weaker industrial activities in July to September suggests that economic activities will likely to have grown at a more moderate pace during the period due to a softer external demand for the country’s exports amidst uncertainties of the global economy”.

“On balance, we expect real gross domestic product to sustain its growth at 4.8% year-on-year in the third quarter, after a brief pick-up to 5.4% in the second quarter, on weaker exports.”

The research house said the resilient domestic demand, supported by the implementation of the various economic programmes and corridor projects as well as higher fiscal spending to sustain consumer spending would provide a strong cushion.

Going forward, RHB expected global economic uncertainties to gradually clear out as time progresses. “This will likely provide a lift to the country’s exports in 2013. As a whole, we expect real export growth to pick up in 2013, albeit from a low base and after a slowdown in 2012.”

Meanwhile, manufacturing sales gained 3.3% to RM52.6bil year-on-year on higher sales volume in September. The improvement was attributed to the higher sales in 83 of 116 industries surveyed.

On a month-on-month basis, sales value increased 3.9% compared to the preceding month.

The sales value in August was revised positive 1% year-on-year to record RM50.6bil. On a seasonally adjusted month-on-month, the sales value in September rose by 1.7%.

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