News Room - Business/Economics

This was the second consecutive decline since the IPI, which covers the manufacturing, mining and electricity, contracted 1.7% in September on-year.

The October IPI also declined by 3.1% when compared with September, tracking the decline in the weaker exports of electrical and electronics (E&E) goods following the slump in demand from the US.

The Department of Statistics said yesterday mining output index fell 5.4%, manufacturing 2.5% and electricity 1.6%.

“The contraction of the manufacturing output was due to decreases in the manufacture of television and radio transmitters and apparatus for line telephony and line telegraphy (24.4%); manufacture of office, accounting and computing machinery (15.5%) and manufacture of electronic valves and tubes and other electronic components (6.9%),” it said.

Mining output declined as crude oil and natural gas production fell by 6.8% and 3.1% respectively.

The weaker manufacturing output also saw power generation declining 1.6% from a year ago and 0.5% from September.

However, for January-October, the IPI expanded 2.7% from the previous corresponding period.

RAM Holdings Bhd chief economist Dr Yeah Kim Leng said the IPI data reflected the effects of global slowdown in most countries.

“This further decline in industrial output was indicative of the unexpected severity of the global economic slowdown. We are expecting the final quarters to be fairly grim,” he told StarBiz.

Most other economies had slipped into recession in the third quarter and it was now hitting Malaysia in the fourth quarter, he said.

With current IPI trends, Yeah expected the gross domestic product (GDP) in the fourth quarter to contract to around 2% to 4% from 4.7% in the third quarter.

“The low single digit contraction is likely to continue until the first half of next year depending on how well the stimulus packages work to curb the slowdown as well as prop domestic demand.

“Many countries have concurrently rolled out stimulus packages to lift the economy as global demand slipped and we would have to see the extent to which these stimulus packages could help accelerate economic growth,” he said.

Although GDP growth would decline in tandem with the drop in manufacturing output, this could be offset by the agriculture and services sectors.

These two sectors were not components of the IPI and they remained resilient, underpinned by domestic consumption, Yeah said.