Weak Oil Sector Offsets Malaysian Factory Gain BUSINESS ASIA By Bloomberg

By Stephanie Phang

Malaysia’s industrial output expanded in October at the slowest pace in three months, the government said Wednesday, as Petroliam Nasional and other producers extracted less oil and gas, countering gains in manufacturing.

Production at factories, utilities and mines rose 4.4 percent from a year earlier, the Statistics Department said. Output growth in September was revised to 5.4 percent from 4.9 percent.

Petroliam Nasional, or Petronas, Malaysia’s state oil company, said last month that oil and gas production dropped 9.4 percent to the equivalent of 1.45 million barrels of oil a day in the six months to September, compared with a year earlier. The company’s domestic capital expenditure fell 5.5 percent to 4.77 billion ringgit, or $1.26 billion.

Mining output by producers, including Petronas, fell 1.6 percent in October from a year earlier, the second month of declines in three. Mining has contracted or grown less than 1 percent in seven of the first ten months of 2005.

“Mining is a bit volatile because it can be subjected to things like shutdowns in operations,” said Suhaimi Ilias, an economist at Affin Securities in Kuala Lumpur. “It’s not that worrying because manufacturing is essentially picking up. That’s the good news out of the below-expectation numbers.”

Manufacturing, which accounts for two-thirds of Malaysia’s industrial output and about a third of the $118 billion economy, gained 5.7 percent in October, the biggest rise in eight months.

Malaysian manufacturers are benefiting from rising global demand for consumer electronic goods like digital music players and video games consoles. Increased production may help the economy to achieve the 6 percent growth rate forecast by the central bank for this year. Growth accelerated to 5.3 percent in the third quarter from a three-year low of 4.4 percent in the second.

Malaysian exports rose 12.4 percent in October from a year earlier, the Trade Ministry said Dec. 5. That exceeded a 7.4 percent increase in September. Exports of electrical and electronics goods, including semiconductors, rose 11 percent from a year earlier, after a 6.6 percent gain in September.

Manufacturing “should pick up, especially given the indications of the improving external demand situation,” and strong domestic demand, said Suhaimi. “For the remaining part of this year at least it should pick up because of the pick-up in electronics demand from the U.S. for the holiday shopping season as well as in China ahead of Lunar New Year in January.”

Electricity output expanded 2 percent in October, the slowest pace in almost two years.

Industrial production was 3.8 percent higher in the first ten months than in the same period last year. Electricity output gained 5.9 percent and manufacturing production rose 4 percent. Mining output rose 0.8 percent.