KUCHING: Industrial Production Index (IPI), which tracks industrial activities, increased to 7.4 per cent year on year (y-o-y) in December, up from 4.8 per cent in November.
AllianceDBS Research Sdn Bhd (AllianceDBS Research) yesterday noted that IPI growth was supported by the expansion in the manufacturing sector, while the mining sector and electricity sector experienced some moderations.
The research house explained that during the month, the increase in the manufacturing subsector largely came from E&E products and Petroleum.
Within the mining subsector, growth was recorded in crude oil extraction and natural gas production during the month.
For full-year 2014, IPI grew faster at 5.1 per cent, up from 3.4 per cent in 2013.
The December IPI performance exceeded consensus expectation’s 4.1 per cent growth and although it was the strongest growth recorded in 2014, AllianceDBS Research viewed this strong performance cautiously since it believed that the performance was unlikely to persist or accelerate further in the coming months.
“Nevertheless, there are major downside risks to the Malaysian economy arising from both external and domestic factors.
“Business sentiments index in 4Q14 had fallen to 86.4 and we expect the cost-push inflation with the GST implementation to further dampen the already fragile sentiments,” it said.
The disappointing China macro-data releases are also signs of concern.
China’s imports growth contracted 19.9 per cent in January while its manufacturing PMI fell into contractionary territory.
“We believe that China’s slowing economic growth could drag the global supply chain of trade activities.
“Besides, we continue to anticipate that the depressed crude oil prices will slow down the mining sector activities in the short to medium term.
“Oil exports have contracted in recent months and the downward trend is soon to be joined by weaker LNG exports.
“Full-year 2014 GDP growth of around 5.8 per cent is more or less a foregone conclusion.
“Moving forward, we are cautious that the slowing domestic economy could pose a downside risk to our full-year 2015 GDP projection of five per cent.”