June 2012 Industrial Production

Yesterday’s report on June’s industrial production numbers were mildly disappointing (log annual and monthly changes; seasonally adjusted)

After May’s surprisingly strong growth, June’s figures have – as I suspected they might – come back down to what looks like a more sustainable growth rate. The overall IPI increased 3.5% in log terms, helped by decent manufacturing output growth and electricity generation, but hampered by a continued decline in real mining output.

In fact mining output is a bit of a puzzle, as it has been on a downtrend since about 2007 (index numbers):

While I understand there have been issues with accidents and sand contamination in a major oil field, current output is actually below the level 12 years ago. Peak oil, Malaysian style? Possibly.

Moving on, with the full quarter of IPI data now available, we’ve got a much more solid forecast for 2Q2012 GDP:

The point forecast is mildly better than last month’s at 4.3% compared to the 4.2% forecast based on just two months of data. Nevertheless, it still represents a continued slowdown in the economy given the 4.7% recorded in 1Q2012.

I’m still cautious about relying too much on this figure for a couple of reasons however – the standard deviation is over 1.0% (i.e. the range forecast is from 2.3%-6.3% which is seriously wide), and the IPI based forecast for this quarter is far and away the most pessimistic compared to all the others I’ve looked at. We’ll find out on the 15th when the GDP numbers are issued.

Technical Notes:

June 2012 Industrial Production Index report from the Department of Statistics (warning: pdf link)