Malaysia’s IPI grows 4.7% in December 2016

KUALA LUMPUR: The index of industrial production (IPI) grew moderately by 4.7% in December 2016 as compared to the same month of the previous year, driven by positive growth in all indices of manufacturing (4.3%), mining (5.8%) and electricity (6.1%).
The manufacturing sector output grew by 4.3% in December 2016 after recorded a significant growth of 6.5% in November 2016.
The major sub-sectors which recorded an expansion in December 2016 were: petroleum, chemical, rubber and plastic products (3.7%); electrical and electronics products (5.3%) and food, beverages and tobacco (8.8%).
The mining sector output posted a higher growth of 5.8% in December 2016 after an increased of 4.7% in November 2016. This expansion was contributed by the increased in natural gas index (12.7%) and crude oil index (0.1%).
The electricity sector output increased by 6.1% in December 2016 following an expansion of 9.7% in November 2016.
Meanwhile, the sales value of the manufacturing sector in December 2016 recorded RM61.5 billion, an increase of 10.6% (RM5.9 billion) as compared to RM55.6 billion reported a year ago.
Total employees engaged in the manufacturing sector in December 2016 was 1,032,897 persons, an increase of 0.6% or 5,853 persons as compared to 1.03 million persons in December 2015.
Salaries & wages paid in December 2016 increased by 5.9% (RM193.8 million) to record RM3.45 billion.
Productivity increased by 10.0% to record RM59,534 as compared with the same month of the previous year.
IHS Global Insight Asia-Pacific chief economist Rajiv Biswas said Malaysian industrial production growth has been supported by improving mining sector production due to expansion in oil and gas output, as well as sustained robust growth in the electrical and electronics manufacturing sector, which remains a key segment of Malaysia's manufacturing sector, accounting for around 35% of total merchandise exports.
The outlook for Malaysia's manufacturing sector in the near-term is expected to be helped by the global and APAC economic outlook for 2017. IHS Global Insight forecasts that the Asia Pacific region will remain the fastest-growing region of the global economy, helped by continued rapid growth in the major Asian emerging markets of China, India and Asean. Stronger global growth will provide some positive impact effects to Malaysia's manufacturing sector, which is also being assisted by the renewed depreciation of the ringgit against the US dollar during late 2016.
The recovery in global oil prices is also supporting Malaysian mining sector output, providing a further boost to overall industrial production growth. IHS Markit forecasts that the average price of Brent crude will rise from US$44 in 2016 to US$58 in 2017, remaining at around US$58 in 2018.
"A positive factor for the Malaysian manufacturing sector in 2017 is the positive outlook for the US economy, which remains an important market for Malaysia's exports. The US economy is forecast to strengthen in 2017, supported by the incoming Trump administration's plans for deep corporate tax cuts and a boost to infrastructure spending," Rajiv said in a statement.
For Malaysia, the US accounted for an estimated 10.3% of total Malaysian exports in 2016, making it the third most important export market after Singapore and China. Exports of electrical and electronic equipment, such as integrated circuits and semiconductors, account for around half of total Malaysian exports to the US. The US is also an important market for other major Malaysian manufacturing exports, including rubber products and medical equipment.
"However, a key risk for Malaysia is from a China hard landing, due to significant economic and financial imbalances that continue to impact upon the Chinese economy. The downside risk scenario of a China hard landing would have negative transmission effects through the Asian manufacturing supply chain should such a risk scenario eventuate."