Malaysia industrial production likely to moderate 3.3 pct y/y in June, says DBS Bank

Malaysia’s industrial output growth for June is likely to moderate, with the index expected to register an expansion of 3.3 percent y/y, down from 4.7 percent y/y in the previous month, partially due to the high base last year.

Nevertheless, this underscores the gradual tapering-off in external demand. The main driver thus far has been the manufacturing sector, particularly the electronics cluster. Both growth in billings and shipments for semiconductors have been on multi-year high. However, there have been some moderations in the billing series in recent months. And shipment will typically follow three months later.

These make for some easing in electronics production in the coming months. In addition, the buoyant outlook on exports hasn’t been reflected in the IP figures. Export growth for the first six months of the year averaged a solid 21.2 percent y/y.

However, reflation in product pricings (i.e., oil and related products) and some extent of base effects have probably provided some “technical lift” to the export numbers. In short, the industrial output growth will be a better gauge on growth outlook.

"And the trend to expect is one of a gradual moderation path. Expect both IPI and GDP growth to ease gradually in the second half of the year," DBS Bank commented in its latest research report.

Meanwhile, FxWirePro launches Absolute Return Managed Program. For more details, visit http://www.fxwirepro.com/invest