Industrial production expansion in May points to GDP growth

Total vehicle sales for the month of May surged 41% year-on-year to 60,780 units, versus 42,977 units in May 2018.

PETALING JAYA: Persistent industrial production expansion in May, together with solid expansion in exports and domestic demand, point towards sustained gross domestic product (GDP) growth in the second quarter of 2019, the finance ministry said today.

“Industrial growth beat market expectations for the third time in a row. The May 2019 industrial production index (IPI) grew 4.0% year-on-year, beating the market expectations for a 3.5% rise, as compiled by Bloomberg.

“This is the third consecutive month Malaysia’s actual industrial production has beaten market consensus,” Finance Minister Lim Guan Eng said in a statement today.

In contrast, industrial production in other Asean economies experienced a contraction.

In the Philippines, Singapore and Thailand, factory output fell 2.1%, 2.4% and 4.0% respectively in May 2019.

The strong IPI growth is reflected in Malaysia’s manufacturing sales, which grew 6.7% to RM69.7 billion in May 2019, from RM65.5 billion a year ago.

Meanwhile, Malaysian exports expanded in May by 2.5% year-on-year, again beating the market consensus of 2.2%.

Like the 4.0% IPI growth, the May 2019 export growth was due to the increased global demand for Malaysian electrical & electronics, and chemical products.

“The expansion of both exports and industrial production signal that the Malaysian economy is resilient in overcoming external disruptions, while benefiting from the ongoing US-China trade war through business relocation, as well as trade and investment diversions,” Lim said.

Approved foreign direct investment (FDI) across all sectors for the first quarter of 2019 rose 73.4% to RM29.3 billion versus RM16.9 billion a year ago.

In the first quarter of 2019, approved FDI growth was driven by a 127% increase in approved manufacturing FDI to RM20.2 billion from RM8.9 billion a year ago.

Lim said the World Bank had forecast Malaysia to enjoy a 4.6% GDP growth for the whole of 2019.

Lim said in the second quarter of 2019, Singaporean GDP grew only 0.1% compared to last year or shrank 3.4% quarter-on-quarter.

Lim said the inflation rate for May 2019 was low and stable at 0.2%.

Separate data from the Department of Statistics also showed that the jobless rate fell to 3.3% in May from 3.4% in the preceding month.

The number of unemployed fell to 519,800 persons in May, from 523,300 in the previous month.

Vehicle sales are one example of robust domestic demand growth. Total vehicle sales for the month of May surged 41% year-on-year to 60,780 units, versus 42,977 units in May 2018.

“For the January-May 2019 period, 253,808 units of vehicles were sold, which was 13% higher than it was in the same period last year.”

Lim said the government is in the midst of preparing its 2020 Budget, which will take into account the relevant risk scenarios caused by the continuing US-China trade war.

“In the meantime, the government is taking a business-friendly approach to take advantage of the permanent reorientation in the global supply chain, leading to investment or trade diversions to Malaysia, while pressing on with its institutional reforms.”