Malaysian industrial output likely to have eased slightly in August

Malaysian industrial output for the month of August is set to be released this week. According to a DBS Bank research report, production growth is likely to have eased slightly to 2.2 percent from 2.6 percent on a year-on-year basis. Nevertheless, there might be downside risk to that noting the sharp fall in export growth from +9.4 percent in July to a fall of 0.3 percent.

However, the softness in industrial production is likely to be more moderate. Besides price effects from the MYR’s depreciation, there has been frontloading of orders by some U.S. and China firms ahead of the tariff hikes in July. Such phenomenon is likely to have sparked off a chain reaction in the regional supply chain, resulting in the sharp rise in the previous months’ figures, followed by a decline in August.

“The outlook in the coming months could be less drastic, as companies adjust to the new trade environment gradually”, added DBS Bank.