The country's industrial production fell 3.5 percent in March from a year earlier, dashing hopes that it was trending higher after rising in February for the first time in 11 months, economists said Wednesday.

The Statistics Department said the 3.5 percent decline in March included a 4.8 percent decline in manufacturing and a 3.2 percent fall in mining, while electricity output rose 8.3 percent.

Industrial output also dipped 0.2 percent from February, it said in a statement.

In the quarter to March, the department said industrial output fell 2.5 percent from a year earlier and was down 1.9 percent from the December quarter.

Economists said the March decline was disappointing after February's rise but not entirely unexpected because February was boosted by the rebuilding of inventories, economists said.

In February, Malaysia's industrial output rose 2.9 percent year-on-year and 3.6 percent from January.

"(The March data) is a disappointment, overall. The market had expected a positive figure," Lee Soo Kai of OSK Research said.

Inventory rebuilding in anticipation of rising demand from the US and other countries boosted activity in February but "end demand was not as strong as expected" and this affected exports, he said.

Adequate production

Song Seng Wun, regional economist at GK Goh Research in Singapore, said the reduced manufacturing activity in March could be due to the ending of the rebuilding of inventory levels.

"Manufacturers ramped up their production schedule ahead of the shutdown for the Lunar New Year festivities in February. There was a spike in export-oriented manufacturing activities and it would seem that the production was adequate to meet subsequent orders," Song added.

Economists said they were maintaining their 2002 economic growth forecast at above four percent, higher than the official 3.5 percent estimate. The decline in manufacturing output was expected to continue to narrow.

Lee pegged 2002 growth at 4.5 percent, saying he expected the economy to pick up in the second half of the year.

Song noted the decline in manufacturing output had narrowed sharply to 3.7 percent in the first quarter to March from an average contraction of 11 percent in the second half of last year.

He said he projected the economy would grow 4.1 percent this year.