Wednesday, December 12, 2012

October 2012 Industrial Production

The October numbers for industrial production released yesterday came out pretty strong. How strong? They floored me, and you’ll see why in a sec (log annual and monthly changes; seasonally adjusted):



On the face of it, nothing really special happened. The overall index was up 5.5% in log terms, and a little over half a percent up on the month. Manufacturing output was approximately on the same level as in September, and there was a slight pullback in electricity output and an uptick in mining output.

All in all, a little better than the average run of results this year, but not unusual. The surprise came when I updated my forecast models – the IPI based forecast generated a Q42012 GDP growth estimate at 7.8% in log terms and 8.1% in percentage terms (RM millions):


That’s…far beyond my expectations. More realistically, the composite weighted forecast (which puts together a couple of other forecast estimates) came in at 5.7% in percentage terms, which would give a full year growth of 5.4%, but this is still much stronger than I expected.

As I recall way back when, the government originally forecast this year’s growth at between 5.0%-6.0%, a forecast that was widely panned as being too optimistic. Subsequent estimates (such as BNM’s) revised the growth forecast downwards. Ironically, the economy looks to hit the middle of the original forecast almost square in the middle.

Of course, the numbers for November and December will have great bearing on how this turns out, though the data we’ve seen so far across the region suggests the pace might actually be sustainable. Next year of course, is an entirely different story.

Technical Notes:

October 2012 Industrial Production Index report from the Department of Statistics

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