Malaysia November industrial output growth slips to weakest in 16 months

A worker seen on a production line at the Scomi Factory in Shah Alam, Kuala Lumpur, Malaysia.
A worker seen on a production line at the Scomi Factory in Shah Alam, Kuala Lumpur, Malaysia. PHOTO: BLOOMBERG

KUALA LUMPUR (Reuters) - Malaysia's November industrial production slowed to its weakest pace in 16 months, hurt by weaker global demand and a decline in mining production.

Government data on Monday (Jan 11) showed factory output in November grew 1.8 per cent from a year earlier, its slowest since July 2014 and well below the median forecast of 4.0 per cent from a Reuters poll of economists.

Southeast Asia's third-largest economy, a gas and commodities exporter, has been hit by falling oil prices and a slowdown in China. The ringgit was Asia's worst performer last year, slumping more than 18 per cent against the dollar. It fell to RM4.4000 per US dollar from 4.3950 before the output data.

Economists said weaker growth in production stemmed mainly from poor external demand, which also resulted in unexpectedly weak growth in exports in November, and a contraction in the mining sector for the second consecutive month.

"The mining sector is facing headwinds from lower energy prices, while the implementation of a Goods and Services Tax in April has affected production since the third quarter of last year," said Jeff Ng, an economist at Standard Chartered in Singapore. "What we're seeing is weakened external demand while domestic demand has remained subdued."

Malaysia's exports in November rose 6.3 per cent from a year earlier, well below market expectations, due to lower liquefied natural gas exports and a marginal rise in demand for electrical and electronic products.

DBS Group Research said the sharp depreciation in the ringgit should have seen higher export figures.

"For export growth to come in at half the past two months'pace despite the undervalued currency, demand must have been really weak," it said in its daily report ahead of output data.

A private manufacturing purchasing managers' index (PMI) showed factory activity in Malaysia contracted for the ninth straight month in November. The index averaged just 47.7 in the last quarter of 2015, the joint-weakest in the survey's history.