PublicInvest Research

Author: PublicInvest   |   Latest post: Tue, 27 Jul 2021, 9:33 AM


Industrial Production Index (IPI) - Highest On Record

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The Industrial Production Index (IPI) jumped by an explosive 50.1% YoY in April driven by a broad-based expansion across all components. This was also pushed by a favourable base effect as output tanked sharply last year (April 2020: -32.1%) due to the full month impact of lockdown measures from the first Movement Control Order for the country (MCO 1.0). The exceptionally high IPI growth may persist until May before growth begins to taper off and normalize from June onwards. Strength in the IPI was driven especially by the manufacturing component which clocked-in another record high (April: +68.0%), its 11th successive month of expansion, driven among others, by sustained global demand for electrical and electronic (E&E) goods.

This is consistent with our resilient Manufacturing PMI trajectory which delivered two consecutive months of expansion (May: 51.3; April: 53.9). The strong manufacturing performance was further aided by a solid rebound in electricity output (April: +22.9% YoY) thanks to the low base advantage and revival in industrial activities following a reversion to the Conditional MCO (CMCO) in major states. Mining component made a breakthrough after delivering its first growth in more than a year (April: +14.3%) thanks to a favourable base effect and a turnaround in output, a trend consistent with OPEC+ output adjustment. On a MoM and seasonally-adjusted basis, IPI ticked 0.1% lower, an improvement from -2.2% in March.

On specifics, manufacturing IP that jumped +68.0% YoY in April (March: +12.7%) remained driven by industrial products for export markets especially petroleum, chemical, rubber and plastic (April: +37.5%) and wood products, furniture, paper products and printing (April: +212.6%) amid demand that was pushed by full economic openings in ASEAN and major economies (i.e., North America). The sector’s performance was further lifted by an impressive E&E performance (April: +70.1%) thanks to global pandemic condition that supported demand for computer and virtual communication equipment. E&E output was also supported by burgeoning demand for 5G cellular products consistent with structural changes in the global telecommunication industry. The turnaround in consumer-related products performance is largely expected thanks to the reversion to the CMCO in key states and the relaxation of Standard Operating Procedures (SOPs) for contact-sensitive sectors which induced a turnaround in sub-sectors such as food, beverages and tobacco (April: +12.6%) and textiles, wearing apparels, leather products and footwear (April: +230.6%).

Mining output (April: +14.3%) recovered, consistent with a turnaround in OPEC+ production, its first after 13 straight months of supply cut. This led to a jump in petroleum oils and condensates (April: +2.7%) and natural gas (April: +23.9%) production in more than a year. The turnaround in mining component is expected to continue thanks to OPEC+ that will embark on sustained supply adjustments (May-June: +350k bpd; July: +441k bpd). OPEC+ may continue normalizing its supply until year-end, if not longer (i.e., 2022), as the global economy continues to recover from the COVID-19 pandemic.


Manufacturing. Output that surged for the 11th consecutive month in April (+68.0%; March: +12.7%), was pushed by key products like E&E (April: 70.1%; March: +13.8%) and petroleum, chemical, rubber and plastic (April: 37.5%; March: +14.1%) thanks to strong external demand especially from ASEAN, China and major economies (North America). It was an impressive turnaround for the rest of sub-sectors and the details are as follows:

  • F&B and tobacco (April: +12.6%; March: +7.2%)
  • textile, wearing apparel and others (April: +230.6%; March: +9.1%)
  • wood products, furniture, paper products and printing (April: 212.6%; March: +11.1%)
  • petroleum, chemical, rubber and plastic products (April: 37.5%; March: +14.1%)
  • non-metallic mineral products and others (April: 141.0%; March: +8.0%)
  • E&E (April: 70.1%; March: +13.8%) and
  • transport equipment and other manufactures (April: 275.2%; March: +20.9%).

It was another impressive performance by E&E (+70.1%; March: +13.8%) consistent with solid manufacturing exports in April (+65.5%), the highest on record. E&E sub-component will remain as the major growth driver for the sector following global pandemic condition and structural changes in the telecommunication industry (5G network by 2025), a precursor for strong demand for its goods. On a MoM and SA adjusted basis, manufacturing output that dropped by 0.5% is an improvement against -1.8% in March.

Mining: Mining component gave the IPI the added push following its first rebound in more than a year. Output that jumped by 14.3% YoY in April (March: -1.9%) was driven by the turnaround in petroleum oils and condensates (April: +2.7%; March: -9.4%) and natural gas (April: +23.9%; March: +4.3%), the first breakthrough for the former and back-to-back expansion for the latter. On a MoM and SA basis, mining output that inched higher by 1.9% is a rebound from -4.6% in March.

Electricity: Output recovered for two consecutive months in April (+22.9%) driven by a reversion to the CMCO in key states (i.e., Wilayah Persekutuan – KL, Selangor), a favourable base effect and higher industrial activities. Output pulled back on a MoM and SA-adjusted basis however, reflected by a drop of 2.3%. The sector is expected to register a steady turnaround in the immediate term to be driven by 1) a favourable base effect and 2) higher industrial activities amid a prospective turnaround in major sectors (services, construction, manufacturing, agriculture) thanks to the full implementation of seven fiscal stimulus packages (PRIHATIN, PRIHATIN+, PENJANA, KITA PRIHATIN, PERMAI, PEMERKASA, PEMERKASA+). This could be tempered however by the reversion to the MCO in June though the downside risks are offset by the decision to allow essential businesses to operate normally (e.g., energy, F&B, water) albeit with a reduced capacity and strict SOPs.


Demand for industrial products may remain strong in the immediate term thanks, among others, to global pandemic conditions, structural changes in the global telecommunication industry and gradual economic openings in major economies - a boon for manufacturing and mining goods. Electricity component is also expected to rebound despite the reversion to the MCO thanks to the decision to allow essential businesses to remain open though with strict SOPs amid reduced capacities. The outlook for IPI will be further supported by the rapid COVID-19 vaccination drive which will push Malaysia and ASEAN peers to reach herd immunity by year-end. This will be further topped by massive policy support to the tune of RM380bn (23% of GDP) and accommodative monetary environment which is expected to continue until year end.

Source: PublicInvest Research - 14 Jun 2021

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