Reading Into Malaysia’s March Manufacturing Data
Malaysia’s Industrial Production Index (IPI) experienced a sharp increase of 3.2% year-on-year in March, exceeding expectations. This growth marks a three-month high and surpasses the 1.5% increase recorded in February, according to a report by Kenanga Research. The market had anticipated a 2.2% rise, while Kenanga’s own forecast (KIBB) was 2.2%.
The surge in IPI is primarily attributed to a rebound in mining output. However, the overall momentum was tempered by weak electricity output and moderate growth in the manufacturing sector.
Key highlights from the report:
- The mining index rebounded significantly, growing by 1.9% year-on-year, a nine-month high, after a sharp decline in February. This recovery was fueled by increased output in crude petroleum (2.2%) and natural gas (1.8%).
- The manufacturing index showed a more moderate growth of 4.0% year-on-year. While still positive, this represents a slight easing from the 4.8% growth in February. The manufacturing sector was supported by stronger growth in electrical and electronic (E&E) products, which expanded by 8.1%.
- The electricity index contracted for the third consecutive month, declining by 2.7% year-on-year.
On a month-on-month basis, the IPI rebounded sharply by 9.3%, the highest increase since June 2022, following three straight months of decline. This aligns with seasonal trends.
Despite the positive March figures, the IPI’s growth for the first quarter of 2025 moderated to a five-quarter low of 2.3%, compared to 3.4% in the fourth quarter of 2024. Similarly, manufacturing growth for 1Q25 slowed slightly to a four-quarter low of 4.2%.
Kenanga Research has maintained its 2025 manufacturing growth forecast at 4.7%, citing support from the ongoing tech upcycle and stable domestic demand. However, the firm acknowledges that escalating global trade tensions remain a key risk, although they could potentially benefit some exporters. Kenanga has also maintained its 2025 GDP growth forecast at 4.8%.
Related
