Malaysia’s April manufacturing plunges 32%
As Malaysia’s industrial production tumbles by 32% in April, the case for more rate cuts seems to be getting stronger and stronger. We expect another 100bp rate cut by the end of 3Q
-32% |
April industrial production growthYear-on-year |
Worse than expected |
Exports dent manufacturing
Malaysia’s industrial production tumbled 32% in April from a year ago, surpassing consensus centred around a -15.4% year on year and our estimate of -25%.
A sharp plunge in exports, by 24% in April, explains the weakness. These are the worse readings for exports and manufacturing since the 2009 global financial crisis.
But its wasn’t just exports weakness that dragged manufacturing down. The Covid-19 movement restrictions also depressed domestic demand. Manufacturing sales - a proxy for retail sales, also posted a 33% YoY fall in April as employment and wages fell.
Today's data is a harbinger for poor GDP data
Industrial production growth closely tracks manufacturing GDP growth, which in turn drives total GDP growth. Undoubtedly, today's data is a harbinger for a sharp GDP fall in the current quarter, thanks to the Covid-19 movement control measures that spanned almost the entire quarter. We recently cut our 2Q20 GDP growth forecast to -8.3% YoY from -6.6%, and the full-year 2020 forecast to -3.9% from -2.9%.
The case for further monetary policy easing by the central bank in this cycle is just getting stronger. The central bank has cut its policy rate by a total of 100 basis points so far this year and we anticipate an additional 100bp cut by end-3Q20, taking it to an all-time low of 1%.
The next scheduled meeting is on 7 July.
Manufacturing and GDP growth (% year-on-year)
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Good MornING Asia - 12 June 2020 This bundle contains {bundle_entries}{/bundle_entries} articles