Signs of slowing GDP growth in last quarter of 2017
The Oct-Nov 2017 data imply slower fourth quarter of last year (4Q2017) GDP growth in Malaysia on the back of slowdown in industrial production growth from +5.9% year-on-year (Y-o-Y)in the third quarter(3Q 2017) to +4.2% YoY in Oct–Nov 2017.
This was due to slower growth in manufacturing (Oct-Nov 2017: +5.4% YoY; 3Q 2017: +7.1% YoY) and mining (Oct-Nov 2017: +0.5% YoY; 3Q 2017: +2.5% YoY) amid steady growth in electricity (Oct-Nov 2017: +4.3% YoY; 3Q 2017: +4.4% YoY).
Other key indicators also moderated in Oct-Nov 2017 e.g. deceleration in retail trade index (Oct-Nov 2017: +8.5% YoY; 3Q 2017: +10.4% YoY) pointing to slower real private consumption growth in 4Q 2017; slower growth in volumes of exports (Oct-Nov 2017: +11.4% YoY; 3Q 2017: +14.1% YoY) and imports (Oct-Nov 2017: +12.8% YoY; 3Q 2017: +13.3% YoY) suggesting moderation in 4Q 2017 real exports and imports of goods and services.
The notable exception is the surge in palm oil output (4Q 2017: +22.8% YoY; 3Q 2017: +8.9% YoY), implying faster agriculture sector growth in 4Q 2017.
“Overall, this is consistent with our full-year 2017 real GDP growth estimate of +5.8% (Jan-Sep 2017: +5.9%), which priced in slower 4Q 2017 (3Q 2017: +6.2% YoY), followed by +5.3% growth in 2018,” said Maybank IB Research.
The Nikkei Malaysia Manufacturing PMI came in at 49.9 (Nov 2017: 52.0) with the survey noting a contraction in new orders. Softer domestic demand was cited as the key factor behind lower volumes of new business, in contrast to new export orders, which rose for a second consecutive month.
Flattish mining
Mining production barely changed in Nov 2017 as it came in at +0.2% YoY (Oct 2017: +0.8% YoY) amid flattish trends in growth of crude petroleum output (Nov 2017: +0.4% YoY; Oct 2017: +0.3% YoY) and natural gas production (Nov 2017: +0% YoY; Oct 2017: +1.4% YoY).
Growth in Oct-Nov 2017 slowed notably to just +0.5% YoY from +2.5% YoY in 3Q 2017 which will be reflected in the mining sector GDP component.
Electricity generation moderated in Nov 2017
Electricity generation moderated to +3.9% YoY in Nov 2017 from to +4.6% YoY clocked in the preceding month. Growth for Oct-Nov 2017 however remained stable at +4.3% YoY compared to the +4.4% YoY in 3Q 2017.
Latest available electricity consumption data, which lags electricity output numbers by a month, saw a surge in ‘industrial consumption’ (Oct 2017: +8.8% YoY; Sep 2017: +2.9% YoY) while ‘domestic consumption’ inched up marginally (Oct 2017: +2.0% YoY; Sep 2017: +1.4% YoY).
Key economic indicators point to slower 4Q 2017
Besides the above-mentioned general slowdown in industrial production (Oct- Nov 2017: +4.2% YoY; 3Q 2017: +5.9% YoY), other key indicators for Oct-Nov 2017 showed deceleration in growth.
Distributive trade index moderated slightly (Oct-Nov 2017: +7.1% YoY; 3Q 2017: +7.4% YoY) amid slower growth in ‘Retail Trade Index’ (Oct-Nov 2017: +8.5% YoY; 3Q 2017: +10.4% YoY), which offset the pickups in Wholesale Trade Index (Oct-Nov 2017: +7.8% YoY; 3Q 2017: +6.7% YoY) and Motor Vehicles Trade Index (Oct-Nov 2017: +0.6% YoY; 3Q 2017: +0.2% YoY).
The high correlation between retail trade index and real private consumption growth, which makes up 54% of GDP, suggest slower consumer spending in 4Q 2017 (3Q 2017: +7.2% YoY; Jan-Sep 2017: +7.0% YoY). On monthly basis, retail trade index recorded its third consecutive month of single-digit growth (Nov 2017: +8.4% YoY; Oct 2017: +8.5% YoY) after the double-digit growth of between +10% and +13% YoY in Apr-Aug 2017.
Earlier data releases included moderating banking system loans growth (Oct-Nov 2017: +4.3% YoY; 3Q 2017: +5.5% YoY); slower double-digit rise in volumes of exports (Oct-Nov 2017: +11.4% YoY; 3Q 2017: +14.1% YoY) and imports (Oct-Nov 2017: +12.8% YoY; 3Q 2017: +13.3% YoY).
These outweigh other positive indicators such as the surge in palm oil output (4Q 2017: +22.8% YoY; 3Q 2017: +8.9% YoY) – implying pick up in agriculture sector GDP in 4Q 2017 – and sustained broad money supply growth (Oct-Nov 2017: +5.1% YoY; 3Q 2017: +5.1% YoY).
“Our full-year 2017 real GDP growth estimate of +5.8% (Jan-Sep 2017: +5.9%) implies slower 4Q 2017 growth (3Q 2017: +6.2% YoY), followed by +5.3% growth in 2018,” said the bank.