Published December 9, 2008

Sharper fall seen for M'sia's Oct factory output

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(KUALA LUMPUR) The annual pace at which Malaysia's factory output is contracting is expected to have accelerated in October due to falling global demand and lower commodities prices, a Reuters poll shows.

The industrial production index, which measures manufacturing, mining and electricity output, is expected to have fallen 2.8 per cent from a year earlier, a bigger drop than 1.7 per cent in September, the median forecast of 10 economists in a Reuters poll showed.

The drop would follow a surprise fall in exports in October of 2.6 per cent, the first annual decline in 17 months.

'Falling commodity prices have likely provided less support to agricultural and mining activities, while weakening G3 private consumption is set to weigh on Malaysia's manufacturing production,' said Calyon economist Sebastien Barbe.

Manufacturing accounts for two-thirds of the index and includes electronics, which form the bulk of Malaysia's exports. But demand for electronic goods has waned as several top economies, including the United States, Japan and the eurozone, have slipped into recession.

'Production likely slowed on softening global demand on the back of a recession, especially in the crucial tech sector,' said Citigroup analyst Leon Hiew.

The factory output forecast for Malaysia reflects dismal results from elsewhere in the region.

Taiwan's and Singapore's exports and industrial production both fell in October as the global financial crisis hit economic growth and demand for their products. -- Reuters