Published March 13, 2009

Malaysian output falls a sharper 20% in January

Electrical and electronics sector leads slide with 45% plunge

By PAULINE NG
IN KUALA LUMPUR

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MALAYSIA'S industrial output continued its sharp deceleration in January, the pace of its output falling by 20 per cent from a year ago after stumbling 16 per cent in December. On a monthly basis, the contraction was 4.5 per cent.

Relief for tough times: Initial reaction to this week's RM60b stimulus package has been tepid. It is aimed at averting a deep recession

The poor start to 2009 was led by steep falls in the manufacturing index of nearly 27 per cent, in itself weighed down by the electrical & electronic products sub-sector careening 45 per cent as overseas demand all but evaporated. The pace of deterioration was also reflected in the sub-sector's month-on- month shrinkage by 17.6 per cent.

The sizeable 12.4 per cent contraction in the electricity index was another telling indication of lower manufacturing output. The mining component meanwhile declined 6.1 per cent.

Compared to December, January's manufacturing output was 7.3 per cent lower, with declines posted in all seven of its sub-sectors.

None were spared hefty reductions, including the food, beverage and tobacco sub-sector which fell 15 per cent compared to a year ago; F&B was lower by 13 per cent and tobacco products by an astonishing 65.5 per cent.

Huge double-digit drops were also registered in the basic metal, transport equipment, wood products, textiles & footwear sub-sectors.

The statistics are bound to raise more red flags as to the rapidly worsening state of the economy which is believed to be on the brink of a recession after expanding a mere 0.1 per cent in the last quarter.

Although a whopping RM60 billion (S$24.9 billion) stimulus package amounting to 9 per cent of gross domestic product was announced this week in the hopes of averting a deep recession, the initial reaction has been tepid.

Analysts question its ability to boost confidence and flagging consumer demand because the programme did not offer tax cuts or other measures which would put direct cash in consumers' hands. 'Big but hollow', was how one analyst described it.

Others think it lacks specific details, could be prone to leakages, and that it comes too late in the day given the bureaucratic tendency for stifling red tape as was demonstrated by the lack of urgency displayed in disbursing the initial RM7 billion funds injection announced in November.

However, speedy implementation of infrastructure projects and private finance initiatives worth billions of ringgit proposed in the package, such as the building of a new budget terminal in Sepang, could provide some relief to building material and transport equipment manufacturers.