Malaysia’s Manufacturing Sector May Recover By Late 2q 2023 -- Rhb Research

KUALA LUMPUR, April 11 (Bernama) -- Malaysia’s manufacturing sector could recover by the late second quarter of 2023 (2Q 2023) following a modest improvement in the momentum of both export and domestic-oriented industries in March, said RHB Research.

In a note today, the research house said the export-oriented sector grew by 3.9 per cent year-on-year (y-o-y) (January: 0.6 per cent y-o-y), while the domestic-oriented industries increased by 7.0 per cent y-o-y (January: 2.7 per cent y-o-y).

“We are already observing the bottoming out process in the manufacturing sector ensue.

“We maintain our 2023 gross domestic product (GDP) growth forecast of 5.0 per cent y-o-y versus the Bloomberg consensus estimate of 4.0 per cent.

“We maintain our 2023 peak overnight policy interest rate (OPR) forecast of 3.25 per cent versus the Bloomberg consensus estimate of 3.0 per cent,” it said.

RHB Research said that February’s Industrial Production Index (IPI) printed 3.6 per cent y-o-y versus January’s print of 1.8 per cent y-o-y and the Bloomberg consensus estimate of 2.5 per cent y-o-y.

RHB Research opined that downside risks would not be significant and are characterised by the following dynamics -- ongoing slowdown in the global economy, partly due to the tightening financial conditions, are likely to weigh on Malaysia’s manufacturing activities.

It pointed out that the S&P Global Malaysia Manufacturing Purchasing Managers’ Index (PMI) remained in contractionary territory at 48.8 points in March 2023 versus 48.4 points in February 2023, but it was the softest fall since September 2022.

“We are more positive on the manufacturing sector outlook in the second half of 2023, in anticipation of higher external demand following the recovery in the global economy.

“For 2023, we expect the IPI to expand by 5.5 per cent y-o-y,” it added.

Malaysia’s manufacturing sales expanded by 10.3 per cent y-o-y in February (January: 6.5 per cent y-o-y), and sales value stood at RM145.2 billion in February (January: RM148.0 billion).

On a side note, RHB Research said February’s retail sales printed 19.2 per cent y-o-y versus January’s print of 21.7 per cent y-o-y -- among the groups that contributed to this expansion were the retail sale of automotive fuel in specialised stores, retail sale of other goods in specialised stores and retail sale in non-specialised stores.

It said on a month-on-month basis, retail trade declined by 2.4  per cent in February versus 0.2 per cent in the previous month.

“Moving forward, we expect consumer spending to remain robust, supported by healthy labour market conditions.

“The February unemployment rate declined further to 3.5 per cent versus 3.6 per cent in January,” it added.

-- BERNAMA