Malaysia's industrial production predicted to jump 2.8%

Thanks to low base effect.

According to DBS, industrial production index for Apr13 today will likely surprise on the upside. Market is looking for a modest 1.6% YoY increase but we reckon that the headline production output may record a healthy expansion of 2.8%. Why the optimism?

Here's more:

Plainly, we‘re not exactly that bullish. It is base effect at work. Industrial production index in April last year recorded its second lowest reading for the year at a mere 109.3. So even if production level in Apr13 fell by about 3-4% compared to the previous month, it will still register a fairly healthy expansion of about 2-3% YoY.

Nonetheless,there is downside risk judging from the poor export performance for the month. Exports contracted by 3.3% YoY in April against a market expectation of a modest 0.4% rise.

Although most were expecting a certain degree of moderation from the technical bounce in March,the fall back to reality in April has been sharper than anticipated.

Perhaps the only factor that could prevent industrial production growth from falling into the red would be Malaysia’s own domestic demand. Healthy private consumption and investment growth,spurred by the current Economic Transformation Programme and the slew of mega developmental projects may well provide some support for industrial production amid the weak external demand.