KUALA LUMPUR: Malaysia’s Industrial Production Index (IPI) for the month of September saw a year-on-year decrease of 6%, following a revised contraction of 7% in August, according to data released by the Department of Statistics (DOS) yesterday.

According to DOS, the annual decrease was attributed mainly to drops in two of the three indices that made up the IPI, namely manufacturing and mining.

“The contraction of the manufacturing output was due to decreases in groups such as electrical and electronics products (22.2%), wood products, furniture, paper products, printing (12%), and non-metallic mineral products, basic metal and fabricated metal products (7.2%),” said DOS.

Manufacturing output for September fell by 7.9% compared to the previous year, while the Mining Index fell by 3%. However, the Electricity Index rose during that period by 1.8%.

On a month-on-month (m-o-m) basis, the IPI decreased 2.4% with both manufacturing and electricity indices contracting 3.6% and 5.7% respectively, while mining increased 1.5%.

Also released yesterday were Malaysia’s monthly manufacturing statistics that showed sales value for the month of September declining by 20.4% year-on-year (y-o-y) or RM10.6 billion to RM41.2 billion. This represents a m-o-m decrease of 0.2%.

According to the DOS statement, the m-o-m decrease was the result of a drop in the sales value of 74 industries out of 116 industries in the survey. This included industries such as the manufacture of basic iron and steel products, and the manufacture of televisions and radio receivers, among others.

According to OSK Research, the drop in both IPI and the monthly manufacturing numbers could have been due to the shorter number of working days for the month of September as a result of the Hari Raya public holidays.

“Regardless, both came in below our expectations,” said OSK.

Maybank Investment Bank’s chief economist Suhaimi Ilias said, “Overall, the IPI numbers still point to improvement in economic conditions, with y-o-y decline continuing to ease. On a quarterly basis, y-o-y decline moderated to 7% in 3Q2009 after the double-digit decline in 1Q2009 and 2Q2009, while the quarter-on-quarter (q-o-q) rebound in 2Q2009 of 2.9% was sustained last quarter, implying 3Q2009 real gross domestic product figures should improve further after the smaller y-o-y contraction and q-o-q growth in 2Q2009.

He added that the manufacturing sales in September were in line with export figures for the month that were released last week.

“But we expect the pace of y-o-y decline in exports, hence manufacturing sales, to ease substantially in October and November, with the possibility of a return to small growth in December,” said Suhaimi.  

OSK concurs stating, “We are expecting the IPI for the month of October to be the last to show a contraction, with positive numbers expected in November. This is based on the fact that the IPI has been on the decline since September last year, with the worst taking place in November 2008.”

Going forward, Suhaimi said the outlook for the emerging recovery in terms of strength and sustainability remained cloudy.

“The risk currently lies in direction of the global economy in the second half of 2010 as global fiscal stimulus effects wear off and global monetary policy makes an exit from current ultra-easy stance involving very low interest rates, easing in financing and credit conditions and liquidity expansion,” said Suhaimi.


This article appeared in The Edge Financial Daily, November 11, 2009.