Malaysia's industrial production index for May forecast to report 5.3% rise

Output level, however, has been falling for two consecutive months and DBS believes that is more telling than the headline number as far as current economic conditions are concerned.

DBS Group Research noted:

Industrial production index for May due today will likely report a 5.3% YoY rise. Though this is an improvement (in YoY term) from the 3.0% mark registered in the previous month, it’s largely on the back of a huge technical lift from an exceptionally low base in the same period last year.

Industrial production index registered 104.8, the second lowest reading in a year in May11. More importantly, output level has been falling for two consecutive months and that in our opinion is more telling than the headline number as far as current economic conditions are concerned.

In addition, exports sales has moderated to just a mere 0.8% sa increase over the previous month, down from 1.5% previously. And PMIs of key export markets have been trending downward, not up. In our opinion, a modest sequential expansion of about 0.5-1.0% MoM sa in the industrial production index can be expected. That’s certainly not as glamorous as what the headline number has suggested and certainly far from bucking the global trend.

As a matter of fact, risk on the industrial production figure is on the downside given the recent deterioration in the global growth outlook. Expect a return to a more sluggish production profile in the coming months when the low base effect fades off.