- Similar to the weak import and export growth numbers seen
on Wednesday, industrial production in March fell significantly, indicating
that external demand weaknesses continue to be the biggest downside risk to
growth in 1H12.
- Malaysia’s IPI growth unexpectedly slowed to 0.6% YoY in
March 2012, versus a revised 8.2% YoY growth in February,which was the highest
level seen in 20 months.
- The slow growth in March came as a surprise for the market,
as it was very much lower than the consensus estimate of +3.3% YoY (Source:
Bloomberg Poll), as well as our view of +4% YoY.
- Apart from external demand woes, Malaysia’s industrial
production in March was also heavily impacted by a high base factor, as output
expanded sharply in March 2011 immediately after the festivities.
- The slower expansion in the IPI was due to the steep
slowdown in manufacturing activities (+2.0% YoY) as well as a contraction in
the mining sector (-4.1%).
- Growth in petroleum, chemical, rubber and plastic
products, the largest components of manufacturing (23% of IPI), expanded by
only 4.2% YoY, compared with the +10.0% YoY growth recorded in February.
- E&E output resumed a contracting trend in March, at
-2.7% YoY versus an expansion of 7.0% in
February. With a weightage of 20.5%, the sector remains as the second largest
contributor to the IPI.
- Moving forward, in line with both the meager manufacturing
as well as trade performance in March, we forecast GDP growth to come in at
4.5% YoY in 1Q12. Despite the slowdown, however, this is not a cause for
concern at all, as it is still near the trend-wise growth of 5%.
- For the remainder of the year, however, we expect GDP
growth to improve, even rebounding sharply to near 6% by 2H12, which would give
us an average annual growth rate of 5% this year.
Source: AmeSecurities
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