Malaysia's factory output in September shrank from a year earlier for the first time in 18 months, data showed on Tuesday, as weak commodity prices and falling global demand took their toll. The industrial production index (IPI), which measures mining, manufacturing and electricity output, fell 1.7 percent from the same month in 2007, confounding expectations for a modest rise of 0.9 percent.
It marked the first fall since March 2007. "To be honest, I am shocked at the numbers given that September exports were above expectations. But it also shows that manufacturers have slashed production quite quickly to respond to the slowdown in major markets like the US and Europe," said Bank Islam economist Azrul Azwar Ahmad Tajudin.
Malaysia's exports grew significantly in September from a year earlier due to strong Asian demand, surprising analysts and outperforming other regional economies such as Taiwan where annual exports fell in both September and October.
But industrial production growth has been steadily easing this year, reflecting weak commodities prices and lower demand both domestically and externally, analysts said. They expect the trend to continue in coming months.
"This reaffirms our expectations that economic growth has slowed markedly in the face of the worsening external environment and falling commodity prices, which will have a knock-on effect on exports and consumer spending," said CIMB economist Lee Heng Guie.
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