Download Malaysia Industrial output growth eases in Dec`16, but not for long

Industrial output growth eases in Dec ’16, but not for long
 Industrial output grew at a softer pace by 4.7% yoy in Dec‘16 vs +6.2% yoy in
Nov ‘16, attributable to the slower expansion in manufacturing output amidst
the still-challenging operating conditions.
%qoq
%yoy
Wt
2016
2015
4Q16
3Q16
Dec
Nov
IPI
100.0
3.8
4.7
5.0
3.9
4.7
6.2
Manufacturing
65.89
4.3
4.8
5.0
4.0
4.2
6.5
Mining
28.92
1.7
5.2
4.6
2.6
5.7
4.6
Electricity
5.19
8.5
2.5
7.6
8.5
6.1
9.7
 In fact, Nikkei Malaysia Manufacturing PMI remained muted at 47.1 during
the month, reflecting the continuous deterioration in its operating conditions
beginning Apr ‘15.
 Nevertheless, industrial output growth remained sturdy at 5.0% yoy in 4Q16
vs 3.9% yoy in 3Q16. Given the weak IPI growth in1H16, overall IPI expansion
for 2016, however, stood at 3.8% yoy vs 4.8% yoy in 2015.
 Despite the stronger-than-expected industrial output expansion in 4Q16,
stronger imports’ than exports’ growth by 5.0% yoy and 2.8% yoy respectively
might have capped the potential upside in GDP growth during the quarter.
 As a result, we reiterate that GDP could have expanded by 4.1% yoy in 4Q16.
Figure 2: Malaysia Nikkei PMI rebounds in Jan ‘17
Going forward:
58.0

56.0
54.0
This year started on a right footing as Malaysia Nikkei PMI rebounded to 48.6,
a 20-month high, in Jan ’17, suggesting a gradual recovery in the operating
conditions.
 This assumption is supported by the uptrend in the U.S., EU and China’s
manufacturing PMI during the same month. An uptick in the major
economies’ manufacturing activity would likely spillover into Malaysia’s.
52.0
50.0
 Nikkei ASEAN manufacturing PMI in Jan ‘17 also showed marginal rises in
output and new orders (Jan ‘16: 50.0; Dec ‘16: 49.4), pointing towards a broad
underlying improvement in operating conditions in the region.
48.0
46.0
U.S.
E.U.
Source: DOSM, CEIC, Bloomberg
China
Malaysia
Jan-17
Nov-16
Sep-16
Jul-16
May-16
Mar-16
Jan-16
Nov-15
Sep-15
Jul-15
May-15
Mar-15
Jan-15
44.0
Malaysia: Economic Insight
Figure 1: Optimistic outlook for 2017’s industrial output growth
%yoy
2017/009|13 Feb 2017
 Besides, semiconductor sales are expected to rise by 3.3% yoy in 2017 (2016:
+1.1% yoy) on the uptake in Internet of Things (IoTs).
 Combined with persistent strength in the U.S. dollar on the expectations of at
least two U.S. Fed rate hikes, these could propel higher demand for Malaysia’s
goods and services during the year.
 We remain cautious over President Trump’s next move especially on U.S.’
trade policies development.
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