Thursday, February 11, 2010

Dec 2009 Industrial Production: Wow! Er, Not Quite

 Yesterday's IPI report from DOS shows some glowing growth numbers in December (seasonally adjusted log annual and monthly changes; 2000=100):

A nice rebound, considering the awful November numbers. Unfortunately, the best thing I can say about this development is that it is just a return to the recovery trend, rather than a quantum jump in output. Seen from the viewpoint of the actual index levels, the only thing that really stands out is electricity output (seasonally adjusted; 2000=100):

All we're really seeing here is another case of the "base" effect obscuring the situation - the recession reached bottom in January a year ago, and December's growth numbers just reflect the lower value of the denominators. On that basis, you could reasonably expect some nice growth numbers for January 2010 as well, but it won't really be a hard "we've recovered" signal either.

On another note, we're likely to see Malaysia "officially" come out of recession in 4Q2009 (the GDP numbers are due in a couple of weeks time). Unofficially, if we use the accepted international way of calculating GDP growth which is the percentage difference between one quarter on the previous quarter (annualised), then we actually came out of recession in 2Q2009 - which coincides with the numbers from the rest of the region. If we adopt more of an NBER methodology (used to determine recessions and expansions for the US economy) which dates recovery from a turnaround in spending, employment and output, then we would have begun our recovery sometime in February-March 2009. Something to keep in mind when comparing Malaysian official numbers against international equivalents.

Technical Notes:
December 2009 IPI report from DOS

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