KUALA LUMPUR: Malaysia’s industrial production index (IPI) momentum remains steady with negligible impact from the ongoing trade war but the resilience may not last.
Public Investment Bank Bhd said this was more so when manufacturing contributes almost 25 per cent to the economy, the second largest contributor after services.
“We reckon that Malaysia may be hit one way or another due to its significant position as the intermediate goods hub leader.
“Malaysia’s trade imbalance position with the US is also a nagging issue that needs an urgent attention as the US doesn’t seem to be budging on its intent to correct its various trade imbalances.
“This can be a source of downside risks to our growth in 2019,” it said in a note today.
Malaysia’s industrial production (IP) growth slowed to 1.1 per cent year-on-year in June after dipping to three per cent in May (April: 4.6 per cent), below consensus expectation (3.2 per cent) as well as ours (3.6 per cent).
PublicInvest said manufacturing IP growth had improved to 4.5 per cent in June (May: 4.1 per cent), lifted by steadier demand for manufactured goods, in line with the sustained expansion in global manufacturing purchasing managers’ index (PMI).
While the trade friction between the US and China boiled over, PublicInvest had yet to see any tangible impacts on the key indicators so far.
“Global manufacturing PMI index is still encouraging, with a steady 53 points recorded in June, the same expansionary trend seen across the US, Eurozone and Japan.
“Only China suffered some weakness in the headline numbers but this is not a concern as it was only marginal.
“Nonetheless, this still indicates expansionary manufacturing activity in the world’s second largest economy,” it said.
PublicInvest said it may take a quarter or so for the impact of trade frictions to show up due to the lag effect.
If any, it said the headline PMI manufacturing numbers may show tangible signs in the third and fourth quarters of the year.