Industrial production grew at a slower pace than market expectations in March.
The Industrial Production Index (IPI) grew by 0.6 per cent, down from a Business Times poll which expected the index to grow by an average 1.78 per cent year-on-year.
The Statistics Department attributed the increase to the rise of manufacturing and electricity indices by 2.0 per cent and 4.9 per cent, respectively. Mining posted a decline of 4.1 per cent.
The major sub-sectors which reported increases in manufacturing output in March included petroleum, chemical, rubber and plastic products as well as transport equipment and other manufactures.
The output for the mining sector fell due to the drop in crude oil index although natural gas index rose.
For the first quarter, the IPI increased by 2.9 per cent comparedwith the same period a year ago. It was contributed by the manufacturing index (4.4 per cent), electricity index (6.1 per cent) while the mining index shrank by 1.7 per cent.
Affin Investment Bank economist Alan Tan said the IPI, when measured on a three-month moving average basis to adjust for seasonal fluctuations, rose at a slower pace to three per cent in March.
“This supports our view that the economic expansion in real GDP (gross domestic product) is losing some momentum going into the first half.”
He said growth of the manufacturing sector slowed in March, as reflected in the weakness of the country’s exports of electrical and electronic (E&E) products, which fell back into negative growth of -6 per cent during the month.
Similarly, the production of E&E products fell sharply mainly due to the declines in output of machinery & equipment products, as well as radio, television and communications equipment and apparatus products.
“Going forward, the uncertainties in the global economic outlook will prompt some manufacturers to scale back on production in anticipation of slower demand from the advanced economies.
“While we expect a smaller magnitude of decline in the global semiconductor sales from the second quarter, the outlook on the E&E demand remains uncertain,” Tan added.
CIMB Investment Bank chief economist Lee Heng Guie commented that growth in the manufacturing sector was largely pulled down by export-oriented industries.
“However, output from domestic-oriented industries, especially construction building materials, still registered decent growth, supported by the Economic Transformation Programme (ETP) and 10th Malaysia Plan projects.”
Meanwhile, the manufacturing sector enjoyed a 6.2 per cent in sales during the first quarter of 2012 to register RM152.9 billion as compared to previously.
For March, it posted a 3.1 per cent growth to record RM54.6 billion as compared with RM52.9 billion reported in March 2011.