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Nikkei Markets

Malaysia's September industrial output grows at a steady pace

Analysts wary over manufacturing production prospects amid prolonged trade war

A metals warehouse outside Kuala Lumpur: Malaysia's industrial growth has been steady but storm clouds loom.   © Reuters

KUALA LUMPUR (Nikkei Markets) -- Malaysia's industrial production rose at a steady pace in September as higher manufacturing activity and electricity generation helped offset a decline in mining output, official data Monday showed.

The industrial production index -- a measure of output from factories, mines, and power plants -- gained 1.7% in September from a year earlier, matching the revised annual expansion pace in August, the Department of Statistics said. On a seasonally adjusted basis, the index fell 0.3% on-month.

Economists said a slowdown at export-focused factories reflected a slump in exports of manufactured goods as U.S.-China trade tensions sapped external demand.

Electrical and electronics weakness continued to weigh on Malaysia's manufacturing sector, said RHB Research Institute Economist Ahmad Nazmi Idrus. "Other manufacturing segments also point towards impact of a weakening external economy, which is starting to affect (the) domestic side."

Last week, Malaysia reported that its September exports contracted at the fastest pace in three years, largely due to declines in commodity exports that worsened the drop in key shipments of electrical and electronics products.

Output from the key manufacturing sector increased 2.5% from a year earlier, while mining activity declined 1.6% in September. The electricity index climbed 4.1% year-over-year.

In September, on a month-over-month seasonally adjusted basis, the manufacturing and mining indexes edged lower 1.3% and 1.4% respectively, while the electricity index expanded 3.3% from August.

Manufacturing sales for September rose 2.9% on year to 72.9 billion ringgit ($17.61 billion).

The latest data comes ahead of the gross domestic product data due later this week. Taking other data on economic activities into account, the third-largest Southeast Asian economy likely expanded 4.7% in the third quarter, according to Barclays Economist Brian Tan.

"While analysis shows Malaysia is expanding its share of the global trade pie due to U.S.-China trade tensions, the size of the overall pie may be shrinking even faster and benefits of trade diversion will likely only be more visible in the longer term when global demand recovers," he added.

The latest data comes as authorities prepare against potential threats to the export-reliant economy amid lingering U.S.-China trade tensions.

On Nov. 8, the central bank unexpectedly announced a cut to its so-called statutory reserve requirement ratio in a bid to release funds into the financial system, and inject more cash into the economy to help fuel credit flow and spur consumption.

Last month, Finance Minister Lim Guan Eng said the government still has room for contingency plans to preempt any impact from a drop in global trade.

--Jason Ng

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