Malaysia's industrial production (IP) growth for December grew 2.7%, on par with Barclays' forecast and above consensus expectations. The growth was consistent with the December's modest growth in export, mainly with mining activity accounting for most of the fall in activity. IP, on a seasonally adjusted month-on-month basis, grew 2.8% in December. The industrial output rose 2.94% in Q4 2015 and 4.5% in full-year 2015.
In industrial production, mining output continues to be weak, declining 1.6% y/y in December. Natural gas production continued to be the main drag, declining 3% y/y in the month. Manufacturing growth was strong, growing 4% y/y. Services sector recorded growth of 4.8% y/y in Q4 2015, mainly driven by strong performances in retail and wholesale trade, along with transport and storage facilities.
Services demand is expected to be resilient in Malaysia and will help decrease downside risks from drag in external demand and manufacturing sector. The nominal value of construction sector expanded 11.2% in Q4.
"With today's data, our Q4 15 growth estimate comes to 4.4% y/y, which suggests annual growth of 4.9% in 2015, marginally below our forecast of 5.0% for 2015. We expect growth to moderate to 4.7% in 2016", says Barclays.
Slower domestic demand is expected to drive the moderation, as private investment and consumption are likely to be weaker in 2016.
