Economists see lower Malaysia Oct industrial output

INDUSTRIAL output is due to fall further in October following the sudden plunge in export numbers for electronics and commodity products.

Signs of factory production slowing were evident when the Industrial Production Index contracted 1.7 per cent in September, the first time in 18 months.

A Business Times poll expects the index to contract by 2.56 per cent year-on-year. The Statistics Department will release the numbers today.

DBS Bank economist Irvin Seah said October's industrial output will most likely fall even sharper than September given the dismal export growth figure.

Exports in October shrunk by 2.6 per cent, the first contraction in 15 months, as electronics and commodity exports fell amid a recession in major economies.

"The weakness in global demand is gradually biting into Malaysia's growth outlook and export-oriented manufacturing will surely be worst hit."

Seah said overall manufacturing output is expected to fall by 1.9 per cent in 2009, down from an already weak 3.4 per cent growth this year.

The Federation of Malaysian Manufacturers recently said orders have dropped by as much as 20 to 30 per cent due to lower demand.

The manufacturing sector accounts for 75 per cent of the country's exports and also accounts for 30 per cent of the gross domestic product.

Both mining and manufacturing sectors are likely to be weak going forward, said TA Enterprise economist Patricia Oh.

"Anticipation of lesser consumption demand and thrifty spending habits would result in lower industrial production, although commodity prices had tumbled from its July's peak."

Business Times-Rupa Damodaran