Wednesday, February 16, 2011

December 2010 Industrial Production: Up On Manufacturing

Last week’s IPI report supports the case for a bounce in economic activity in 4Q 2010 (log annual and monthly changes; seasonally adjusted):



As presaged by the bump in December exports, manufacturing led the way up, output growth having accelerated continuously every month since July 2010. That’s been enough to offset a slowdown in electricity output growth, and a fall-off in mining output.

If you’re wondering why we’re reporting higher income from oil & gas as well as tin, it’s because prices have more than compensated for reduced output. I’m not going to hazard a guess as to causality here – whether companies in the mining sector (especially the oil companies), are slowing production due to the increased revenue, or because supply constraints are helping to boost prices. Obviously from a global perspective, there’s a little bit of both (demand and supply factors) going on.

Be that as it may, here’s the likely impact on 4Q 2010 real GDP (RM millions):


Total 4Q 2010 IPI suggests GDP growth for that quarter will be 4.3% y-o-y, a slight slowdown from 3Q’s 5.3%, with full year growth right on the government’s estimate of 7.0%.

But annualised quarterly sequential growth is going to boom – based on these numbers, 4Q GDP will be 7.8% higher than 3Q’s on a seasonally adjusted basis:


That would make 4Q’s GDP growth the best quarterly growth this year, beating out 1Q 2010’s 7.4%. Not bad, considering November’s disappointing numbers.

Bottom Line: December’s industrial production numbers have pushed up estimates of 4Q GDP growth.

Technical Notes:

December 2010 Index of Industrial Production Report from the Department of Statistics

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