AmWatch - Economic Update : Factory output grows by 4.3% in March, 14 May 2014

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Economic Update : Factory output grows by 4.3% in March         

The Industrial Production Index (IPI) for Malaysia registered a growth of 4.3% YoY in March vs. ours and consensus estimates of 2.0% and 4.5% respectively. The YoY IPI growth was contributed by the indices of manufacturing (+6.4% YoY) and electricity (+4.6%). On the other hand, mining had contracted by 0.9% due to the decrease in production of crude oil (-1.5% YoY) and natural gas (-0.4%).

Overall exports had advanced in recent months on the back of the pick-up in global demand. Production for export-oriented industries improved by 7.5% YoY in February (vs. +7.1% in January). Production for domestic-oriented industries had also accelerated by a healthy 17.1% in February (vs. -1.2% YoY in January).

Separately, we note that overall manufacturing sales had registered a moderated growth in March as domestic growth softened. Sales grew by 10.1% to RM56.5bil in March (February: +16.1%). Manufacturing sales in March were mainly driven by improvements in the E&E segment and refined petroleum products. Elsewhere, manufacture of refined petroleum products, which accounted for 22.8% of total sales value of manufactured products, rose by 1.7% YoY to RM12.91bil in March. 

Ahead of 4Q13 GDP release on 16 May, we expect the Malaysian economy to grow by 5.2% in 1Q14 on the back of a healthy trade surplus (4Q13: +5.1%). The slowdown in domestic growth will likely be compensated by the boost in net trades. In nominal terms, trade surplus could amount to RM104.2bil in 2014 (2013: RM70.63bil).

That said, weaknesses in imports during the month of March suggest that overseas shipment will probably slow down in the coming months. For 2014, we envisage aggregate domestic demand to grow by 4.7%, accounting for 92.8% of total GDP. No change to our full-year GDP growth projection of 5.1% for 2014 (vs. 4.7% in 2013).

Others :

Malayan Banking : Revised basis for capital estimates     Hold

Plantation Sector : Palm oil inventory up 4.6% MoM in April         Overweight

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