KUALA LUMPUR: Although Malaysia's Industrial Production Index (IPI) slowed in March at 2.4 per cent compared to 3.1 per cent in February, it had surpassed expectations with manufacturing recovery remaining intact, said Kenanga Research.
In a research note today, the research house said manufacturing performance is expected to improve, driven by further improvement in external demand, backed by the technology sector's upswing and China's economic recovery.
It noted that the IPI recorded a decline of 0.2 per cent following contractions across both mining (-1.8 per cent) and electricity production (-3.1 per cent), and growth was also dragged down by softer manufacturing production (+0.3 per cent) compared to February (+0.9 per cent).
"Notably, it said the latest Manufacturing Purchasing Managers' Index (PMI) reading points to a stabilisation in April, at 49.0 points, compared to 48.4 in March, nearing the 50.0 neutral level, while the domestic-oriented industry is expected to remain robust, supported by resilient domestic demand.
"This is fueled by increased tourist arrivals and spending, along with stable labour market conditions. The average unemployment rate is projected to decrease to 3.2 per cent in 2024, compared to 2023's 3.4 per cent)," it said.
"Likewise, we maintain our first quarter 2024 Gross Domestic Product (GDP) growth target at 3.3 per cent, slightly lower than the advanced GDP estimate by the Department of Statistics Malaysia at 3.9 per cent. Overall, our growth forecast remains at 4.5 to 5.0 per cent in 2024," it said.
Meanwhile, Hong Leong Investment Bank Bhd (HLIB) said that the global manufacturing PMI eased to 50.3 in April compared to 50.6 in March, but it is still in expansionary territory.
In a research not, it said Malaysia's manufacturing index gathered slight momentum largely due to stronger export-oriented production while domestic-oriented production slowed.
"The growth of new business was supported by an uptick in new export orders, marking the first upturn in international trade volumes in over two years.
"Going forward, recovery in external demand is expected to benefit Malaysia's export-oriented manufacturing sector, while the domestic-oriented sector will continue to be supported by resilient consumer spending and further implementation of projects," it added. - Bernama