PETALING JAYA: Industrial production rose by 5.6% in September from a year ago and the slowing rate of activity by manufacturers in the country would mean slower economic growth in the third quarter.

With the September figure in, industrial production index (IPI) - a key figure for economic growth - for the third quarter averaged 4.3% compared with 11% in the second quarter.

CIMB Investment Bank chief economist Lee Heng Guie said the huge slip in IPI on a quarterly basis pointed to exports and industrial output losing steam.

With these latest IPI figures, he expects GDP for the third quarter to grow by 5.7%, compared with 8.9% in the second quarter. He maintained his full-year GDP forecast of 7%.

The year-on-year increase in the September IPI was due to increases in all indices: manufacturing (7.6%), mining (1.7%) and electricity (3.1%).

Month-on-month, however, the IPI contracted by 0.8%.

AmResearch Sdn Bhd senior economist Manokaran Mottain said the figures showed that manufacturing figures were still strong.

"While there is a moderation in growth of the IPI in the third quarter compared with 11% in the second quarter, this is due to the disappearance of the low base effect. We've been enjoying big numbers up to the second quarter because of the low base effect," he said .

He said that on a quarterly basis, the divergence was actually very small, at less than 1%. On a monthly basis, the contraction was due to the shorter working month.

While Manokaran targeted a slower GDP growth of 6.5% for the third quarter, he was still confident that the GDP would grow between 7% and 8% for the entire year.

- The Star Online