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KUALA LUMPUR (June 15): Malaysia's industrial sector delivered a surprisingly strong performance in April, prompting at least one house to raise its full-year target.
RHB raised its full-year industrial production index (IPI) growth forecast to 4.9% from an earlier 4.1% due to robust year-to-date expansion and resilient demand for electrical and electronics exports, alongside firm domestic consumption.
April's IPI jumped 8.2% from a year ago, far exceeding the Bloomberg consensus estimate of 4.5%, though it came in slightly below RHB's own projection of 9.0%.
Growth was broad-based, with manufacturing accelerating to 8.3%, electricity generation surging 10.5%, and the mining sector rebounding from two consecutive months of contraction.
Manufacturing sales also expanded 9.1% year-on-year, driven largely by the electronics, food, and petroleum sub-sectors.
Echoing RHB, TA Securities warned that not all signals point to sustained strength.
The S&P global manufacturing purchasing managers index fell to 49.0 in May from 51.6 in April, slipping back into contraction territory for the first time since February.
Export orders declined for a third straight month, and production growth softened after two months of expansion, suggesting that industrial momentum may be losing some traction.
TA Securities continues to expect the mining sector to remain relatively subdued amid production constraints, though manufacturing resilience should help cushion any weakness.
On the cost front, producer price pressures are firming, with the producer price index (PPI) accelerating to 5.4% in April, the strongest reading since August 2022.
A sustained rise in global crude oil prices could further elevate production costs, as a 1% long-term increase in Brent is estimated to lift the PPI by roughly 0.2%.
Meanwhile, RHB views the potential imposition of US tariffs on Malaysian exports as manageable, noting that nearly 69% of the country's shipments to the US remain unaffected.
Despite the encouraging April IPI print, both houses advise caution, as softer leading indicators and trade-related uncertainties could moderate growth in the coming months.