Economists still upbeat about M'sian economy

PETALING JAYA: Economists are cautiously optimistic on the economy
despite the Industrial Production Index (IPI) showing a contraction
when compared with the preceding month.
According to the
Statistics Department, the IPI climbed 1.4% in July compared with a
year ago, disappointing consensus estimates that expected a growth of
3%. Output declined by 4.7% compared with June.
The growth was underpinned by the stronger performance of the manufacturing sector, with the index rising by 5.5%.
While
on a seasonally adjusted month-on-month basis, the IPI in July
contracted by 4.7% which was attributed by the reduction in all
indices. Manufacturing contracted 3.4%, mining (10.2%) and electricity
(1.8%).
“Going forward, we maintain our view that sluggish
performance in exports in the near term, which will be offset partially
by robust domestic consumption and investment activities. In this
regard, we maintain our forecast at 4.5% to 5% in third quarter of
2012, moderating from 5.1% in first half of 2012.
“For the
full-year, we maintain our gross domestic product (GDP) forecast at
4.7% in 2012,” said Alliance Research chief economist Manokaran Mottain
in a report.
He said growth would likely be spearheaded by Economic Transformation Programme (ETP) as well as the 10th Malaysia Plan, which would have spill-over to the services and manufacturing sectors.
“On
the demand front, we expect continued boost from domestic demand,
especially in investment and consumption spending in the private
sector,” he said.
Dissecting the numbers from the fresh data, he
said the July IPI for manufacturing activity was still on a low-gear,
as it has posted a marginal month-on-month drop of 3.4%. Index-wise,
the manufacturing sector is still weak compared with March (118.4 in
July versus 125.3 in March).
“The expected downtrend is
supported by recent drop in the JPMorgan Global Manufacturing PMI
(Purchasing Managers' Index) to 48.1 in August, as output and new
orders fell at their fastest pace in over three years. The US ISM
factory index fell from 49.8 to 49.6 in August, while China's official
PMI contracted for the first time since November 2011 (49.2 in
August),” he said.
Malaysian Rating Corp Bhd
chief economist Nor Zahidi Alias said the slower IPI growth was
consistent with slower export performance of -1.9% year-on-year
following weaker external demand.
“Going forward, we think that
the weakness in the industrial production will continue before it
starts to recover in the final quarter this year. It is noteworthy that
the US ISM new orders index (which has high correlation with Malaysian
exports and IPI) has averaged 53.5 year-to-date till August, which is
within our expectation,” he said.
He said the level was
consistent with Malaysia's IPI growth of 3% to 6%, suggesting that the
second half GDP growth would likely be in the range 4.5% to 5%, and
would take the overall GDP growth to around 5% this year.
Meanwhile,
monthly manufacturing statistics showed sales value of the
manufacturing sector for July recorded a modest growth of 5.2% to
RM52.5bil compared with a year ago, but decreased by 0.6% as compared
with the preceding month.