Friday, September 17, 2010

July 2010 Industrial Production: Not A Good Start To The Quarter

This is the longest break from blogging I’ve taken since the end of last year – I’ve barely been online since last week, travelling and seeing family during Eid. The only thing I’m aware of that’s been happening is the developing news of the Sosilawati murders, and even that’s been peripheral. But I’m getting back in the groove from today onwards, and first up is last week’s industrial production report.

It’s not very encouraging, with the main index falling for two consecutive months, and manufacturing falling for three (log annual and monthly changes; seasonally adjusted; 2000=100):



That’s pretty clear evidence that economic activity is slowing fairly rapidly. Electronics production has actually fallen for four consecutive months (log annual and monthly changes; seasonally adjusted; 2000=100):


It’s unlikely that August numbers will be any better with the Ramadhan effect in full swing. This does not bode well for 3Q GDP growth if the analysts are correct and we’re seeing the end of an inventory cycle. As stocks of finished goods might have overshot the levels required by actual demand, given the slowdown in Western economies, production should lag sales for a while. But that does mean – to me at least – that we’ll probably see a reversal of that trend as we leave 2010 and enter 2011. Double-dip recession? Not here at least, as I think there’s still enough domestic demand to sustain production. For a while at least.

Technical Notes:

July 2010 IPI report from the Department of Statistics

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