No currency effect in Malaysia's industrial output

Malaysia's October industrial output is on tap today. Consensus is looking for a 4.8% YoY expansion, pretty much in line with the 5.1% rise in the previous month. However, chance is that there could be disappointment in this regards. A forecast of 3.0% has been penciled in the forecast as the external headwinds have been strong and the recent stunning export performance doesn't tell a full picture. 

Export sales for October rose by a stunning 16.7% YoY. While export performance may appear encouraging given an otherwise uncertain external environment and dicey domestic political conditions, it is largely currency effect at play. The ringgit has weakened sharply by about 30% against the USD compared to a year ago. Basically, the strong showing in export doesn't imply that global demand has picked up or that the amount/volume of exports has risen. It's simply currency effect. 

As such, taking the cue from export performance to predict the industrial production will be a mistake. That currency effect doesn't quite benefit your industrial production level. There's little price effect there and it all boils down to demand. In this aspect, demand has been weak. Nothing in the external environment has offered any positive impetus to lift production output in the same way that the export growth has suggested.