Industrial Production (IP) in Jan 2014 registered its seventh straight gain of +3.9% YoY (Dec 2013: +6.4% YoY).

We expect IP growth this year to be faster at +5.0% versus +1.7% recorded in 2013.

Firmer global economic growth, hence external demand, is the key factor, although it will still be a bumpy ride in the early part of 2014 amid developments in China as well as the QE Taper-related market and policy adjustments in the Emerging Markets.

Industrial Production (IP) in Jan 2014 registered its seventh straight gain even as its pace moderated to +3.9% YoY (revised Dec 2013: +6.4% YoY; Consensus: +6.5%). MoM, IP reversed its previous months surge as it declined by –16.5% (revised Dec 2013: +14.5%), compounded by the production downtime due to the Lunar New Year holidays. The seasonally adjusted (SA) growth illustrated this as it also fell by -8.1% MoM (Dec 2013: +3.1% MoM).

“Biomedical” rebounded for the first time in 3 months to offset declines in “General Manufacturing Industries” (GMI) and “Precision Engineering”. Pharmaceuticals, which accounts for 84% of the Biomedical cluster’s output, recovered by +4.5% YoY (Dec 2013: -21.2% YoY) on higher production of active medicinal ingredients. Medical Technology in the meantime continued to churn out positive growth (Jan 2014: +7.8% YoY; Dec 2013: +18.2% YoY), driven by higher demand for medical instruments and consumables. The biggest drag on headline IP growth came from General Manufacturing Industries which contracted by -4.2% YoY (Dec 2013: +3.1% YoY) as result of lower output in Miscellaneous Industries (Jan 2014: -5.8% YoY; Dec 2013: +6.8% YoY) and Printing (Jan 2014: -11.4% YoY; Dec 2013: -11.9% YoY) subdivisions. The Precision Engineering cluster on the other hand registered back-to-back declines (Jan 2014: -1.0% YoY; Dec 2013: -0.7% YoY), largely on lower output of Precision Modules & Components (Jan 2014: -10.0% YoY; Dec 2013: -7.5% YoY) following lower demand for optical instruments & photographic equipment from the US and Europe, and lower output of electronic connectors.

Source: Maybank Kim Eng Research - 28 Feb 2014