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KUALA LUMPUR: MIDF Research has maintained its forecast for Malaysia’s industrial production index (IPI) growth for 2022 at 4.3%.
This is driven mainly by the growing domestic spending and sustained rise in foreign demand, especially for electrical and electronics and other manufactured goods.
However, it cautioned that several risks such as rising price pressures and prolonged supply constraints could adversely affect final demand and production outlook.
“Apart from the worsening of global supply chain given the uncertainty from the ongoing war in Ukraine and amid an ongoing shortage of materials and inputs, a possible slowdown in major economies such as the United States and European countries can be a more significant drag to the global growth,” it said in a note.
Earlier, the Statistics Department reported that the IPI increased 4.1% year-on-year (y-o-y) in May 2022 (April 2022: 4.6%) and the manufacturing sales value grew 15.7% y-o-y to RM142bil in the same month.
While it did not change its IPI forecast, MIDF Research noted that the IPI growth was lower than its and the market’s expectation following the sharp drop in the mining sector’s output.
The research house said that based on the S&P Global Malaysia manufacturing Purchasing Managers’ Index (PMI), which increased marginally to 50.4 in June 2022 (May 2022: 50.1), activities in the country’s manufacturing sector were slightly better last month, with stabilisation in production on the back of continued growth in new orders.,
Echoing MIDF’s view, RHB Research said the manufacturing sector growth was expected to remain robust in the next few months, in tandem with healthy exports following continued global recovery.
The continued expansion in the Malaysian manufacturing PMI signalled a stable manufacturing sector performance as well, it said in a note.
“On the downside risks, we opine that the manufacturing sector outlook might be clouded by the impact of rising costs pressures and uncertainties in the global landscape.
“The inflationary pressures have built-up amid material shortage and elevated commodity prices. The Producer Price Index, which measures the costs of goods at the factory gate, has trended higher in recent months and is set to stay in double-digit momentum,” it said.
RHB Research maintained its second-quarter 2022 gross domestic product growth estimate at 6.1% y-o-y, given the robust economic indicators released.
However, the research house said it expected a slower pace of growth in the fourth quarter of 2022. — Bernama