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Nikkei Markets

Malaysia's September industrial production growth gains pace

Modest rise reflect potential growth moderation in economy facing external risks

Malaysia's hidden debts may lead to fear of Asia sell off.

KUALA LUMPUR (Nikkei Markets) - Malaysia's industrial production grew a tad faster than expected in September driven mostly by the manufacturing sector, official data released Friday showed.

The industrial production index -- a measure of output from mines, power plants and factories - rose 2.3% in September from a year earlier, the Department of Statistics said. The median forecast in a Nikkei Markets' poll was for a 2.2% increase. In August, the index had climbed 2.2% from a year earlier.

Economists said the latest data reinforces expectation of a slower growth at the Southeast Asia's third-largest economy amid rising risks to the export-reliant nation due to the U.S.-China trade tensions. Malaysia is due to report the third-quarter gross domestic product data on Nov. 16.

"Overall IPI growth indicates further moderation in GDP expansion pace in the third quarter," said MIDF Amanah Investment Bank. Factory output will likely grow 3.8% for the whole of 2018, although global trade tension and supply disruption in commodity sector pose downside risk, it said.

Data released earlier this week showed exports rising 6.7% in September from a year earlier. Although Malaysia largely relies on its resilient services sector to crank out more than half of its economic output, electronic goods account for more than a third of exports, and any dent in demand for such products could hurt manufacturing activities and potentially squeeze growth.

Malaysia's economy is expected to expand 4.8% in 2018 and 4.9% in 2019, according to government projections. Growth has decelerated for three straight quarters, expanding 4.5% in the three months ending June 30.

On a seasonally adjusted basis, the industrial production index fell 0.4% from August.

Output from the key manufacturing sector increased 4.8% from a year earlier, while electricity index rose 4.2% in September. The mining output dropped 6.2% year-over-year, the fifth-consecutive month of decline.

On a month-over-month seasonally adjusted basis in September, the manufacturing and electricity indexes edged higher 1.5% and 1.4% respectively, while mining activity declined 6% from August.

Manufacturing sales for September rose 8.2% on year to 70.8 billion ringgit ($16.96 billion).

--Jason Ng

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