Fall in Malaysia industrial output sharper than expected

INDUSTRIAL output, which mainly measures factory production, fell sharper than expected in October, indicating that recession in major economies is hurting demand for Malaysia's exports.

The industrial production index (IPI) fell for the second straight month, down 3.1 per cent in October, after a 1.7 per cent contraction in September, the Statistics Department said.

It was also much weaker than many predicted. A poll done by Business Times had expected IPI to fall 2.56 per cent.

The IPI is expected to get much worse over the next few months with half the world economy in recession, commented ECM Libra Investment Bank economist Dr Lai Mun Chow.

"Based on the latest IPI, it reinforces our forecast that the year-on-year real growth of the manufacturing sector for the fourth quarter would shrink by 6.4 per cent.

"Given that the manufacturing index carries a 70.7 per cent weighting in the IPI, the latest IPI indicates that the export growth of the country would be depressingly low over the near term," he said.

The IPI measures the production of manufacturing, mining and electricity sectors.

Meanwhile, the mining sector registered the highest decrease among the three indices, falling 5.4 per cent, due to the decline in the production of crude oil and natural gas.

The manufacturing output in October shrank 2.5 per cent compared with the same period last year and was also down by 5.4 per cent against September.

Electricity, the third index component of the IPI, also showed a fall of 1.6 per cent compared with a year ago. It also fell 0.5 per cent compared with September. - By Rupa Damodaran