KUALA LUMPUR: Industrial output numbers in June were better than market expectations, helped by a rebound in manufacturing activities. 

The Industrial Production Index (IPI), which measures changes in manufacturing, electricity and mining indices, rose by 1 per cent from a revised -5.6 per cent in May.

Manufacturing activities improved in June by 4.5 per cent compared to a year ago while the electricity index registered a 3.6 per cent growth.

The Statistics Department said the output in June was due to rises in petroleum, chemical, rubber and plastic products (9.2 per cent), non-metallic mineral products, basic metal and fabricated metal products (18.3 per cent) and food, beverages and tobacco products (9 per cent).

The mining sector, on the other hand, decreased by 8.6 per cent due to the drop in crude oil index (by 15.6 per cent).

The mining sector declined by 11.7 per cent in the second quarter compared to a year ago.

Wu Kun Lung of Credit Suisse said despite the rebound, the IPI fell 1.9 per cent in the second quarter.

Mining production, which accounts for 30 per cent of the total IPI and 7 per cent of real gross domestic product (GDP), remained 10 per cent below its average in the first quarter, he added.

"Based on the second quarter's IP, we estimate that real GDP expanded by 3.7 per cent year-on-year in the second quarter, supported by services, construction, and agriculture sectors."

Wu expects the IPI to pick up in the coming months as temporary supply chain disruptions from Japan fade, while mining production is also likely to rebound once the technical problems at the Kikeh oil field are resolved. 

Bank of America Merrill Lynch also expects Malaysia's GDP to decelerate at a weaker 3.3 per cent in the second quarter.

With the bank forecasting the US economy to grow at 2.3 per cent in 2011 and 1.7 per cent in 2012, this could also impact Malaysia's GDP growth.

"A one per cent fall in US GDP growth would reduce Malaysia's GDP growth by about 0.8 per cent during a downturn, and that negative impact could blow up to about 1.6 per cent during a recession," he added.

Meanwhile, the manufacturing sector posted a 12.9 per cent growth in June to record RM50.8 billion sales year-on-year.

For the first half of the year, the sector posted a double-digit growth of 11.3 per cent to post RM291.9 billion in sales.