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Economy

Malaysia's May industrial output rises 4.6% on year, beats view

KUALA LUMPUR (Nikkei Markets) - Malaysia's industrial production, driven mostly by the manufacturing sector, accelerated to beat market expectation in May, boosting prospects of stronger economic growth this year.

The industrial production index -- a measure of output from mines, power plants and factories -- rose 4.6% in May from a year earlier, the federal Department of Statistics said in a statement. That compares to the median forecast of 4% increase in a Nikkei Markets' poll of economists and April's 4.2% year-on-year rise.

Economists said the latest set of data, including manufacturing sales released separately, underscore resilient global demand for electronics that will keep factories humming in the trade-reliant economy.

"By all accounts, it appears that the Malaysian economy has carried through the same robust momentum that saw the economy expand above expectations in Q1, and it looks like this has been the same story for the second quarter of 2017," said Jameel Ahmad, an analyst at foreign exchange broker FXTM.

Output at the key manufacturing sector rose 7.3% from a year earlier, while electricity production grew 2.5% in May. The mining activity shrank 2.3% year-over-year, the Department of Statistics said.

Manufacturing sales rose 19.5% on-year, the fastest pace in seven years, to 61.9 billion ringgit in May in line with strong exports growth. Earlier data show that exports surged 32.5% from a year earlier in May thanks to stronger shipments of electronics.

On a seasonally-adjusted month-on-month basis, the industrial production index rose 0.7% in May. The manufacturing sector grew 0.2%, while electricity generation was up 3.3% and mining output, including oil production, climbed 0.9% in May from April.

Malaysia is part of an alliance of 24-oil producing nations, led by the 13-member Organization of the Petroleum Exporting Countries that pledged to remove nearly 1.8 million barrels of crude oil from daily global production in a bid to prop up crude prices.

Stronger recovery in exports and higher domestic demand could help in-part to lift Malaysia's economic expansion to 4.8% this year, RHB Research Institute wrote in a note to investors. Another factor would be an expected modest increase in public spending and investment, it said.

Malaysia's economy will likely expand between 4.3% and 4.8% this year, according to government forecast. Last year, the third-largest Southeast Asian economy grew 4.2%.

--Jason Ng

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