IPI to remain steady in near-term, say research firms

KUALA LUMPUR, Feb 9 -- The Industrial Production Index (IPI), which ended 2021 on a strong note, is set to remain steady in the near term, thanks to full economic openings post-National Recovery Plan (NRP), said Public Investment Bank Bhd.

It said the index would be further pushed by base effect advantages and favourable external conditions, a boon especially for the manufacturing component.

“IPI will also be driven by a lag impact of expansionary global fiscal strategies in 2021 and accommodative interest rate environment until the first half of 2022 -- a boost for consumption activity and therefore, demand for manufacturing and mining goods.

“The Organisation of the Petroleum Exporting Countries and its allies (OPEC+) higher supply direction by more than 200,000 barrel per day will also bode well for the mining component,” the research firm said in a note today.

Yesterday, the Department of Statistics Malaysia announced that the IPI increased 5.8 per cent year-on-year in December 2021 on the back of the increment of 8.4 per cent in the manufacturing index and 3.7 per cent in the electricity index.

The mining index, however, recorded a decline of 2.5 per cent during the month.

Public Investment Bank Bhd said the electricity output is expected to rebound -- a condition to be made possible by full economic openings under Phase 4 of the NRP.

“The steady turnaround in the headline index forms the basis of our sanguine IPI outlook though we remain cautious, given the risks of potential outbreak in workplaces and labour shortages facing the manufacturing sector.

“Output could also be hampered by supply chain disruption and shortages in raw materials and containers -- a condition that may improve gradually, however,” it added.

Meanwhile, AmBank (M) Bhd chief economist/head of research Dr Anthony Dass, in a note, said the  manufacturing performance is expected to remain healthy in 2022.

He said export-led manufacturing activities such as electrical and electronic products, chemicals and chemical products, and rubber products would continue to benefit from global demand.

“Besides, domestic-led manufacturing activities will also benefit from the reopening of the economy and now the full opening of the borders with effect from March 1, 2022.

“Opening up of the borders will yield positive impact to the services sector, especially tourism and tourism-related activities.,” he said.

Dass added that strong positive spill over effects is envisaged from March 2022 onwards to other economic activities either directly or indirectly.

-- BERNAMA