KUALA LUMPUR (Aug 9): Malaysia’s manufacturing sector is expected to maintain its growth momentum in the near term following the stronger-than-expected industrial production index (IPI) in June 2024, according to economists.
Malaysia’s IPI surged 5% in June compared to the same month last year, exceeding the 4.2% increase predicted in a Bloomberg survey and May’s 2.4% year-on-year (y-o-y) gain.
However, the manufacturing purchasing managers' index (PMI) slipped below the neutral rate of 50 in July, at 49.7, compared to 49.9 in June.
Still, Kenanga Investment Bank Bhd (Kenanga IB) is optimistic about the manufacturing sector's upward trajectory in the near term.
“This outlook is partly supported by anticipated recovery in export-oriented industries, led by a technology upcycle and ongoing government multi-year infrastructure projects,” Kenanga IB said in a note on Friday.
The research house also expects stable growth in domestic-oriented manufacturing for the rest of 2024 despite its recent slow-down, supported by Employees’ Provident Fund Account 3 withdrawals, increased tourist arrivals, and a stable labour market.
Following the strong manufacturing output and robust domestic demand in the second quarter of 2024 (2Q2024), Kenanga IB now foresees that the actual gross domestic product (GDP) for 2Q2024 — scheduled to be released on Aug 16 — could exceed its current forecast of 5.1%.
Nonetheless, Kenanga IB still maintained its overall 2024 GDP forecast between 4.5% and 5%.
Meanwhile, RHB Investment Bank Bhd (RHB IB) is also optimistic about Malaysia’s manufacturing sector, citing an improved global and domestic economic environment, coupled with increased investment appetite.
“Ongoing developments, such as the continued growth in exports and robust global semiconductor sales, reinforce our positive view of Malaysia’s manufacturing sector,” RHB IB said in a note.
With the strong IPI data in June, RHB IB believes that Malaysia’s economic growth will sustain at 5.8% y-o-y for 2Q2024, and be at least 5% in 3Q2024.
“We maintain Malaysia’s GDP forecast at 4.6% y-o-y for 2024 (above the consensus estimate of 4.5% y-o-y), with the balance of risks tilted to the upside, given the stronger-than-expected 2Q2024 advance GDP growth print," it added.