Friday, April 12, 2013

February 2013 Industrial Production

I’ve been skipping a lot of data releases this month because work, and because of course with the elections a month away, there are more important topics to look at.

Nevertheless, the economy waits for no man, and this development is interesting enough to warrant a look (log annual and monthly changes; seasonally adjusted):



Frankly, February’s industrial production data sucked, too put it mildly. The main index fell 4.5% in log terms from last year and was 1.4% lower from January’s level.

This could, with some justice, be put down to the CNY effect, except that electricity production rather unusually dropped sharply as well. Historically, that has almost never happened outside a recession, so I’m a little concerned that this might turn out a little more serious than the overall picture suggests.

On the other hand, the IPI has been suggesting economic growth is higher than it should be i.e. it’s underestimating the level of economic activity. That’s because last year’s growth was largely supported by investment and using goods produced overseas (aka imports) rather than domestic production.

This could be the case again (log annual changes):


The current quarter IPI is suggesting 1Q2013 growth at just 3.3% (standard error of 1.1%), which sounds on the low side to me. The weighted average forecast on the other hand is a more palatable 5.8% (s.e. 0.5%), which sounds a tad too high.

I’d still err towards thinking GDP growth will come in a little on the low side, though given last quarter’s growth surprise, I wouldn’t put it past the economy to pull another fast one.

Technical Notes:

February 2013 Industrial Production Index report from the Department of Statistics (warning: pdf link)


  1. 1 . The most likely culprit is decline in PC sales that had a cascading effect on components manufacture and thus electricity needs:

    2. CNY shutdowns invariably impact not only production but also the commercial and office sectors. Less premises using electricity would mean less electricity production.

    3. Off topic, I think due to the elections, the Penang government and to a lesser extent, Selangor are keeping the lid on things, but effectively another quarterly drop in 1 above would mean crimped production hours or retrenchments. I am not too sure whether on a sectoral basis, this sector is in a technical recession. But in the long run, things are not looking to good either.

    And that will have a devastating impact on Penang if they have not institutionalized or even embarked upon an industry shift paradigm yet. With manufacturing hitting a funk, one wonders whether there are alternative drivers of growth to move local GDP numbers. From an apolitical perspective, the Penang government does not have a Plan B. and I doubt whether its services sector has the capacity to handle the shortfall.

    The problem with Penang is that its industrial architecture is too wired within the electronics paradigm . It should have embarked on reconfig in the 2008/09 recession, moving into incentivizing mobile based production (look at Apple's numbers as a comparator), pharmaceuticals, green tech, nanotechnology, fibre optics etc but stubbornly persisted with its old dinosaur. It can still leverage on that by drawing people like Google, building up a local app industry tailored for android,apple etc and working on aspects like software development, developing IT solutions, being an incubator hub for cloud based app development etc

    I don't think the BN have fully grasped it too although they have better idea an a vastly superior record of driving innovative change. In addition to the freeport, I would have gone for heritage zone degazzeting to drive inner city renewal ( keep only the architecturally valuable buildings), have a round island highway and LRT plus inner city tram system, establish a butterworth- Georgetown rail link ala the chunnel , redevelop Jerejak as a resort island complete with casino (kaffir only), a cable car link to the island and theme park, turn Balik Pulau into a halal food hub, and clean tech zone etc. and of course hastening all those in para 3 but then I am digressing, am I.........

    Warrior 231

  2. I doubt most of it is about PCs. The production of PC in general has been declining for ages now. It was a bad drop in February for PC production but hey, it's nothing compared to previously seen.

    In fact if you look at the February IPI table (see page 64), petroleum production (which has a huge weight) drop was worse than the drop PC and related items production.

    And petroleum was not the only one down. Other major categories unrelated to PC/semiconductors had trouble growing as well.

    I mostly think it's just seasonality. It's a double whammy really. Chinese New Year in Feb 2013 and a leap year in Feb 2012. So, I'm discounting most stuff in February.

  3. You know what's interesting? Seeing growth in certain categories despite overwhelming negative growth figures. The categories are:

    1. Shoes (hahaha. Presents?)
    2. Wood products
    3. Paper (Ang Pow packets?)
    4. Rubber (!)
    5. Metal (!)
    6. Machines (?)
    7. Vehicles/trailers (MRT and stuff?)

  4. Shoes : read for all that tramping for votes, ditto rubber
    Paper: ballot paper and self promotion paraphernalia answers that.....yawn

    Now here is something more interesting...........

    Thought you will enjoy this, by Jerry Muller. It originally appeared in Foreign Affairs, only available via subscription here:

    But a gist of it appears here

    While the argument is rather ingenious, it does have a grain, nay, a morsel of truth to it especially when mapped against divorce trends and patterns along ethnic lines here in Malaysia. But then again you can't really divorce policies and by default politics,can you,as some commentators rightly point out. And here is a reality cheque:

    Nothing like some heavy stuff to put one to sleep when for some strange reason the night owl effect wears thin.....yawn

    Warrior 231

  5. Wonder whether all that above 55%, 60% or whatever % Malaysian national debt doomsday mongers will have wet dreams reading this:

    Why even the IMF is whistling a different tune:

    Dang..there goes my flight plans!!. I have already packed my bags for a quickie getaway on worries that a debt mountain crashing down on Malaysia will not look pretty on my 401K, my equities, my FDs, my undies blah blah blah.

    Precisely what we get when we leave important matters of bread and butter in the hands of economics illiterate monkeys, scaremongering yahoos and boneheaded apes masquerading as our know it all polirats. polirats? Remember 'politikus'.

    Now you see why democrazy can make everyone a cynic overnight? And lil wonder why inane believers deserve to be shafted where the sun never shines and the moon never peeks day in day out.......hahahahahahaha

    By the way...knock knock knock are you there, aardvark?.......hahahahaha

    Warrior 231