KUALA LUMPUR, March 12 — MIDF Research said the Movement Control Order (2.0) impact on the Industrial Production Index (IPI) in January 2021 was smaller than expected as it grew 1.2 per cent year-on-year (y-o-y) which was stronger than the research house expectation.
The IPI data which was released by Department of Statistics Malaysia (DoSM) today said the IPI rise was driven by the increase in the manufacturing index.
The research house said the sustained IPI growth was encouraging as it expected manufacturing to continue growing, benefiting from rising external demand for electrical and electronic products as indicated by the positive export growth.
“Despite the imposition of MCO 2.0 in almost all states from mid-January 2021, the growing production also reflected a rather minimal impact on industrial output as businesses were generally allowed to operate.
“We do see some impact from the tighter movement control as the manufacturing output fell from December 2020 although the overall production level was higher than January 2020,” it said in a note today.
MIDF Research said sales of manufacturing products continued to grow although expanding at a slightly slower pace of 4.1 per cent y-o-y attributable to the continued weakness in sales of refined petroleum products as well as the softer sales of computer and peripheral equipment and motor vehicles.
It also expects manufacturing sales to remain weak with MCO 2.0 being extended through Feb 21.
“This impact is expected to be temporary at least for the early parts of 2021 as we foresee sales to gradually improve given the easing of restrictions and pick up in domestic spending activity going forward.
“In particular, the manufacturing sales growth will also rebound this year particularly from March 2021 due to the low base in 2020,” it said.
Looking at the latest global manufacturing Purchasing Managers Index (PMI) which rose to 53.9 in Feb 2021, the research house expects a further recovery in global production activities although prolonged lockdowns and restrictions could have impacted final demand.
“Any weakness in the export demand could hurt the outlook for production activities, but for some countries improving sentiment following easing restrictions and rollout of vaccination programmes will see a better demand outlook going forward,” it said.
It also forecasts the IPI to rebound by 6.3 per cent in 2021 compared with a contraction of 4.2 per cent in 2020 as sentiment improves following the rollout of the COVID-19 vaccination programmes in Malaysia and in other countries.