Industrial production (IP) unexpectedly fell by -2.5% YoY in May 2014, dragged by lower output of Electronics and Pharmaceuticals.

Increased volatility in IP growth trend expected going forward amid the continued uneven global economic growth.

No change in our full-year IP growth forecast of +5.0% (2014 YTD: +6.3%; 2013: -2.3%).

Industrial production (IP) in May 2013 fell for the first time in 11 months by -2.5% YoY (revised Apr 2014: +5.3% YoY; Consensus: +2.4%), dragged by declines in Electronics and Biomedical. MoM, IP shrank by -7.5% (revised Apr 2014: -7.8% MoM), while the seasonally adjusted measure fell by a smaller quantum of -5.7% MoM (s.a Apr 2014: -4.0% MoM).

Electronics dropped for the second month (May 2014: –7.5% YoY; Apr 2014: -7.6% YoY) on lower outputs of Semiconductors (May 2014: –6.4% YoY; Apr 2014: -9.4% YoY), Data Storage (May 2014: – 29.2% YoY; Apr 2014: -24.2% YoY) and Computer Peripherals (May 2014: –11.8% YoY; Apr 2014: +4.3% YoY).

Biomedical pulled down by Pharmaceuticals. The biomedical cluster broke a three-month spell of double-digit output increases as it fell by -9.2% YoY in May 2014 (Apr 2014: +24.0% YoY). Pharmaceuticals, which accounts for 84% of biomedical output, contracted by -11.6% YoY (Apr 2014: +26.7% YoY) on lower output of active pharmaceutical ingredients. Medical Technology, which contributed to the remaining 16% of the cluster’s production, continued to expand (May 2014: +4.6% YoY; Apr 2014: +9.6% YoY).

Excluding the volatile Biomedical output, the drop in the adjusted IP was smaller at -0.5% YoY (Apr 2014: +0.1% YoY).  

Source: Maybank Kim Eng Research - 27 Jun 2014