economic update - IPI Jan/AUG 2012

Industrial Production Index (IPI) – January 2012
Mining Index drags down IPI result

Below expectation – The Industrial Production Index
(IPI) for Jan’12 rose 0.1% y-o-y but went down to 2.9%
m-o-m to 108.9. The result was below our forecast of
111.0 to 115.0.
The deteriorating Mining Index has weighed down the
overall performance of January’s IPI.

Manufacturing Index remains resilient –
Manufacturing Index increased 1.1% y-o-y but slumped
3.9% m-o-m to 115.0. We believe the better performance
of Manufacturing Index was underpinned by increment in
the following groups: -


*Petroleum, Chemical, Rubber and Plastic Products
(2.9% y-o-y)

*Non-Metallic Mineral Products, Basic Metal and
Fabricated Metal Products (5.9% y-o-y)

*Food Products, Beverages and Tobacco (16.4% yo-y)

We reckoned the increased demand for these products is
due to Japan’s energy consumption and reconstruction
purposes.

Mining index continues its downward trend –
Mining Index contracted 3.1% y-o-y and 0.6% m-o-m to
93.4. This was due to decline of crude oil and gas indices
by 2.4% y-o-y and 3.1% y-o-y respectively.

Electricity – Electricity Index climbed 2.7% y-o-y but
dropped 0.4% m-o-m to 123.4. We reckoned the
increment of energy consumption corresponded with
increase in manufacturing goods production.

IPI is expected to shrink further in February – With
sluggish outlook for Manufacturing and Mining Indices, we
expect IPI will decline further to a range of 104.0-108.0

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Economic Update

Industrial Production Index (IPI) – August 2012
- IPI weighed down by lacklustre manufacturing index

Within expectation - IPI continued its downtrend in August after posting -2.4% y-o-y and -1.5% m-o-m to 108.0, the first decline since Aug’11. Such result is within
our forecast for August.

The continuous waning demand for E&E goods has dampened IPI growth, particularly on Manufacturing index after a decline in exports to main partners i.e. Thailand, Singapore and Indonesia.

Manufacturing index continued to be pressured by waning E&E exports – Manufacturing index shrank 3.4% y-o-y and 6.4% m-o-m to 115.4 on back of the
deteriorating manufacturing orders following the fiscal problem in the US (cutting expenditure and increasing tax in the budget), the debt crisis in Euro zone and slower
China economy.

Recovery by glooming mining production - Mining index rose 2.0% y-o-y and 20.0% m-o-m to 91.7 against 76.4 in July after registering a two-month consecutive
decline. Such robust growth in Mining index was driven by strong growth in natural gas index (6.4% m-o-m) to offset a marginal decrease in crude oil index (0.6% m-o-m).

The jump in natural gas volume is associated with the completion of gasification plant in Kerteh and Melaka, which is starting to kick off in July, as a way to meet the short fall in the prolonged shortage gas supply in Malaysia.

Electricity index increased y-o-y but dropped m-o-m – Electricity index went up 0.5% y-o-y but shrank 5.8% m-o-m to 125.9. We reckon this is attributed to the declined usage of electricity in manufacturing plants.

The IPI downtrend is poised to be persistent in upcoming months – Following sovereign measures in Western nations as part of cutting the budget deficit and national debt, we expect IPI figures to remain low in Sep’12 at –2.0% y-o-y and –0.9% m-o-m to 107.0.

(Source: JF Apex)