Tuesday, April 14, 2009

Bottoming Out?

I don't know how I missed these, but both IPI and trade February numbers for Malaysia were released last week (bad, bad RSS feed!). There are faint signs of hope that the economy, as far as production is concerned, is now bottoming out.

Industrial Production
The growth numbers are all bad (log annual changes, 2000=100):

But the raw indices themselves have gone flat or turned up, indicating some resumption in production (2000=100, seasonally adjusted):

My feeling is that these are related to China's massive stimulus package, which came into effect in November and is starting to turn up in their production statistics. The two main categories that have turned up are in iron & steel production, as well as refined pteroleum products, which tends to support this intuition:

Nevertheless, as per my previous post on IPI, there's little to be sanguine about these numbers. Capacity utilization looks pretty bad, which means many industries must be flirting with insolvency. If there isn't a bigger pickup in the next few months, a lot of capacity will be going offline.

External Trade
Trade is also looking up, although you wouldn't know it from the growth figures (log annual changes):

The trade numbers themselves are turning up however, and are even stronger on a seasonally adjusted basis:

Have we seen a bottom? It's impossible to say on the basis of one month's data, but I'm encouraged by the rebound. Note that this is happening even before the 2nd stimulus package was even introduced, much less kick in. Be that as it may, the stimulus is still necessary, especially the RM25 billion in credit guarantees. If there ever was an argument for fiscal support for industry, the time is now.

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