PETALING JAYA: The ongoing recovery in production and employment point to a solid and gradual mend of Malaysia’s economy this year.

       The industrial production index (IPI) growth had accelerated to 9.4% year-on-year (y-o-y) in November 2021, exceeding the consensus estimate of 7.3% y-o-y.

       This was largely due to a broad-based improvement across all production sectors including manufacturing (11.3% y-o-y), mining (3.7% y-o-y) and electricity production (5.1% y-o-y).

       Despite supply chain issues caused by the various lockdowns, analysts noted that the strong growth in November bodes well for the economy.

       According to TA Research, this lifts the IPI for the October-November 2021 period by an average of 7.5% y-o-y.

       For comparison, overall output in the third quarter of 2021 had declined by 1.1% y-o-y. “This supports our view that the fourth-quarter 2021 gross domestic product (GDP) growth will be better.

       “We are also positive on the factory output performance going forward, as the latest manufacturing purchasing managers’ index (PMI) also indicated stronger expansion in manufacturing activities in December 2021 as it rose to an eight-month high of 52.8,” it said in a report yesterday.

       Notably, the global manufacturing PMI remained expansionary with higher rates of output and new orders towards the end of last year, supporting demand for locally produced goods.

       Hong Leong Investment Bank Research (HLIB) added that despite some drag from price and supply chain pressures, there are tentative signs that these are starting to ease.

       “The New York Fed’s gauge for global supply chain pressures fell to 4.37 standard deviations above normal in November, coming off the peak of 4.43 in October.”

       In line with this, IHS Markit has also reported a smaller number of global companies whose output was affected by raw material or staff shortages.

       “While supply chain pressures remain prominent, robust external demand is still anticipated to support manufacturing activity in Malaysia,” said HLIB.

       The labour market situation in the country has also continued to show improvements.

       Malaysia’s unemployment rate remained steady at 4.3% last November, with the jobless count decreasing further for the third consecutive month. The number of unemployed persons continued to decrease on an annual basis by 9.2% to 694,400. In October 2021, unemployed persons numbered 705,000 people.

       While this remains elevated relative to February 2020’s pre-pandemic rate of 3.3%, the progress of most states under the National Recovery Plan should provide further support for the labour market recovery amid normalisation of economic activities.

       “For 2022, we predict the jobless rate to trend lower at the range of 3.5% to 4%,” said TA Research.

       HLIB has maintained its 2022 GDP forecast at 5.5% y-o-y, given the overall brightening outlook for the economy.