KUALA LUMPUR (May 13): Although Malaysia’s Industrial Production Index (IPI) slowed in March at 2.4% compared with 3.1% in February, it had surpassed expectations with manufacturing recovery remaining intact, said Kenanga Research.

In a research note on Monday, the research house said manufacturing performance is expected to improve, driven by further improvement in external demand, backed by the technology sector’s upswing and China’s economic recovery.

It noted that the IPI recorded a decline of 0.2% following contractions across both mining (-1.8%) and electricity production (-3.1%), and growth was also dragged down by softer manufacturing production (+0.3%) compared to February (+0.9%).

“Notably, it said the latest Manufacturing Purchasing Managers’ Index (PMI) reading points to a stabilisation in April, at 49 points, compared to 48.4 in March, nearing the 50 neutral level, while the domestic-oriented industry is expected to remain robust, supported by resilient domestic demand.

“This is fueled by increased tourist arrivals and spending, along with stable labour market conditions. The average unemployment rate is projected to decrease to 3.2% in 2024, compared with 2023’s 3.4%),” it said.

“Likewise, we maintain our first quarter 2024 Gross Domestic Product (GDP) growth target at 3.3%, slightly lower than the advanced GDP estimate by the  Department of Statistics Malaysia at 3.9%. Overall, our growth forecast remains at 4.5% to 5% in 2024,” it said.

Meanwhile, Hong Leong Investment Bank Bhd (HLIB) said that the global manufacturing PMI eased to 50.3 in April compared wit 50.6 in March, but it is still in expansionary territory.

In a research not, it said Malaysia’s manufacturing index gathered slight momentum largely due to stronger export-oriented production while domestic-oriented production slowed.

“The growth of new business was supported by an uptick in new export orders, marking the first upturn in international trade volumes in over two years.

“Going forward, recovery in external demand is expected to benefit Malaysia’s export-oriented manufacturing sector, while the domestic-oriented sector will continue to be supported by resilient consumer spending and further implementation of projects,” it added.