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Nikkei Markets

Malaysia's November industrial production gains pace

Fastest expansion rate in five months does not erase growth worries, analysts say

A Proton manufacturing plant in Tanjung Malim, Malaysia: Analysts warn of sluggish global trade weighing on the country's export-reliant factories.   © Reuters

KUALA LUMPUR (Nikkei Markets) -- Malaysia's industrial production accelerated in November and grew at its fastest pace in five months, driven mostly by manufacturing activity and electricity generation, official data released on Friday showed.

The industrial production index -- a measure of output from mines, power plants and factories - rose 2% in November when compared to the same month last year, according to Department of Statistics. In October, the index rose 0.3% on-year. The index rose 1.8% in November from the previous month on a seasonally adjusted basis.

Analysts said the latest print, coupled with other data released earlier, indicate potential improvement in fourth-quarter gross domestic product, but flagged risks of softer economic growth ahead as sluggish global trade weighed on Malaysia's export-reliant factories.

"Despite the optimism, we may still see softer GDP growth in the short run," said RHB Research Institute's Economist Ahmad Nazmi Idrus. "For 2020, the data so far remains bleak, especially on the external side, as well as lower private consumption."

Data released last week showed that Malaysia's November exports fell 5.5% from a year amid drop in shipments of key electronic and electrical goods. Still, the decline was less severe than October's 6.7% year-on-year decline.

Malaysia's Manufacturing Purchasing Managers' Index, or PMI, meanwhile rose to a 15-month high in December thanks to new orders. Data from Singapore, another export powerhouse in Asia, also indicated an expansion in manufacturing activity after seven consecutive months of contraction.

Output from the key manufacturing sector increased 2.5% from a year earlier, while mining activity expanded 0.5% in November. The electricity index climbed 1.6% year-over-year.

On a month-over-month seasonally adjusted basis, the manufacturing and electricity indexes in November rose 0.8% and 1.2% respectively, while the mining index rose 5.5% from October.

Manufacturing sales for November rose 2.3% from a year earlier to 73.5 billion ringgit ($18 billion).

"Overall, the high-frequency data on economic activity point to GDP growth slumping" to 3.5% in the final quarter of 2019, said Barclays Economist Brian Tan. "The economy will likely remain under pressure in 2020 when we expect a further slowdown to 4.0%."

For the whole of 2019, Malaysia's economy will likely grow 4.7%, according to government forecasts. This year, the third-largest Southeast Asian economy may expand 4.8%.

Still, policymakers are bracing for potential slowdown. Malaysia, which benefits from higher crude prices, has a contingency plan if the US-China tariff tussle worsens, or a war breaks out following geo-political tensions in the Middle East, Finance Minister Lim Guan Eng said earlier this week.

--Jason Ng

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