Malaysia’s Industrial Output Climbs 8.4% as Mining Rebounds, E&E Stays Strong

Malaysia’s industrial production grew 8.4% in May, driven by mining and resilient exports, while economists expect slower momentum later in 2026 as stockpiling eases and costs remain elevated.

Malaysia Industrial Growth Strengthens

Malaysia’s Industrial Production Index (IPI) rose 8.4% year-on-year in May, slightly higher than April’s 8.2% growth but below market expectations of 9.4%. The expansion was driven by a sharp rebound in mining activity, while manufacturing remained the main contributor to overall industrial output.

Mining output surged 19.8% from a year earlier, accelerating from April’s 6.8% increase as petroleum and natural gas production improved. The strong performance was partly supported by a low base from last year, although mining production declined 2.2% on a month-on-month basis, suggesting growth could moderate as base effects fade.

Manufacturing continued to anchor industrial growth, contributing 5.1 percentage points to headline IPI.

Export-oriented industries expanded 8.8%, supported by stronger output in refined petroleum products and computer, electronics and optical products. The performance mirrored the 45.3% year-on-year jump in Malaysia’s nominal exports in May, highlighting resilient external demand.

The electrical and electronics (E&E) sector remained the key growth driver, benefiting from robust global semiconductor demand, particularly from artificial intelligence, electric vehicles and industrial applications. Analysts expect the sector to continue supporting Malaysia’s export-oriented manufacturing in the coming months.

Meanwhile, domestic-oriented manufacturing slowed sharply to 2.0% from 8.0% in April due to weaker production of food products, pharmaceuticals and motor vehicles.

Economists believe inventory accumulation by manufacturers, aimed at reducing supply risks linked to geopolitical tensions in the Middle East, will continue supporting manufacturing activity during the second quarter.

However, growth momentum is expected to soften in the second half of 2026 as stockpiling activities ease and comparisons become less favourable following strong industrial performance last year.

Manufacturers also continue to face elevated material and logistics costs, despite signs that input cost inflation is easing. Producer prices rose 7.8% year-on-year in May, reflecting persistent cost pressures.

Despite these headwinds, analysts maintained their 2026 manufacturing growth forecast at 4.5%, supported by resilient E&E demand and steady domestic economic activity.