KUALA LUMPUR (Nikkei Markets) — Malaysia’s industrial output grew at its slowest pace in four years in October as factory activities and electricity generation eased, data Thursday showed, indicating risk of slower growth in 2019’s final quarter.
The industrial production index — a measure of output from mines, power plants, and factories – rose 0.3% in October when compared to the same month last year, the Department of Statistics said in a statement. In September, the index rose 1.7% year-on-year.
The index declined 1% from September on a seasonally adjusted basis.
Economists said the third-largest economy in Southeast Asia may be expanding more slowly than previously thought as simmering U.S.-China trade tensions sapped demand from its export-oriented factories.
Overall, the weakness in industrial production and other high-frequency data point to economic growth softening further, said Brian Tan, an economist at Barclays. “We see modest downside risks to our forecast” of gross domestic product growth sliding to 3.5% in the last quarter and miss full-year growth of 4.3%, he said.
Exports declined 6.7% in October from a year earlier due to lower shipments of key electrical and electronics products, data released last week showed. The contraction, the third straight month, was broadly in line with regional trends.
Malaysia mostly relies on domestic demand to power economic growth. However, consumer spending and business investment have decelerated, sparking worries at time when heightened external uncertainty have hurt its economy that is vulnerable to global shocks.
In the third quarter, gross domestic product expanded 4.4% year-on-year, the slowest pace in a year. The government projected a 4.7% growth for 2019 and 4.8% for 2020.
“We still feel that we will able to achieve” 4.7% growth this year and will “likely maintain” 4.8% expansion target for next year, Finance Minister Lim Guan Eng said at a news conference on Thursday. “At the moment, it is still on track.”
Lim was responding to questions about the World Bank’s downgrade of Malaysia’s economic growth forecast in 2020 to 4.5% from October’s estimate of 4.6% following weaker-than-expected investment and exports in recent months.
Output from the key manufacturing sector increased 2.2% from a year earlier, while mining activity declined 5.8% in October. The electricity index climbed 0.5% year-over-year.
On a month-over-month seasonally adjusted basis, the manufacturing and electricity indexes in October fell 0.5% and 3.5% respectively while the mining index rose 0.8% from September.
Manufacturing sales for October rose 2.2%, its slowest pace in three years, to 74.6 billion ringgit ($17.96 billion) from 73.1 billion ringgit in the same month last year.
“Looking ahead, we foresee challenging period for manufacturing sales to improve next year due to bleak external outlook,” MIDF Amanah Investment Bank wrote in a note to clients.
–Jason Ng
