A more sluggish production profile awaits Malaysia

Risk on the industrial production figure is on the downside given the recent deterioration in the global growth outlook, says DBS.

DBS Group Research noted:

Industrial production index for May is due for release this Wednesday and a 5.3% YoY rise can be expected. Granted that this is an improvement (in YoY term) from the 3.0% mark registered in the previous month, there’s really nothing much to shout about.

Industrial production index registered 104.8, the second lowest reading in a year in May11. So that’s already a huge technical lift to begin with. Secondly, output level has been falling for two consecutive months and that in our opinion is more telling than the headline number as far as current economic conditions are concerned.

In addition, exports sales has moderated to just a mere 0.8% sa increase over the previous month, down from 1.5% previously. So in opinion, a modest sequential expansion of about 0.5-1.0% MoM sa in the industrial production index can be expected. And that’s certainly not as glamorous as what the headline number has presented.

Indeed, risk on the industrial production figure is on the downside given the recent deterioration in the global growth outlook. Expect a return to a more sluggish production profile in the coming months when the low base effect fades off.