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Business sentiment picks up, says MIER

Business sentiment picks up, says MIER

16 Feb 2024

CONFIDENCE among local manufacturers is starting to recover, according to a quarterly survey by the Malaysian Institute of Economic Research (MIER).

The Business Conditions Index (BCI) for the fourth quarter 2023 (4Q23) increased by 9.3 points compared to the previous quarter, reaching 89 points.

On an annualised basis, the BCI also experienced a 3.1-point rise from 85.9 points, though the index for 4Q23 still fell below the 100-point threshold.

The BCI expected index for 4Q23 recorded a value of 113.5 points, a significant improvement from the 89 points recorded in 3Q23.

“Companies continue to express confidence in the outlook for the next three months, with particularly high optimism observed in the beverage and textile sectors. It is hoped that the support allocated for micro, small and medium enterprises (MSMEs) in Budget 2024 will aid their survival and contribute to the realisation of the Madani Economy vision,” according to the report released on Feb 8.

MIER’s Business Conditions Survey, conducted four times a year, asked respondents about their perceptions of the current and expected business situation.

Rather than attempt to quantify trends, the BCI was intended to detect changes in the short-term outlook allowing inferences to be drawn regarding the end of near-future economic growth and could be useful as yet another tool to gauge impending economic climate.

The BCI sales index for manufacturing companies dropped 9.2 points quarter-on-quarter (QoQ) and 10.3 points year-on-year (YoY), reaching 34.7 points.

In 4Q23, 50% of the respondents reported poor sales, 31% reported satisfactory sales and only 19% reported good sales.

Overall, the beverage, textile, medical, precision and optical instrument, watch and clock, and other manufacturing, repair and installation industries reported good sales. However, manufacturers of paper products, electrical equipment and furniture reported poor sales, according to the report.

On a positive note, the report said foreign demand surged by 8 points to 39.3 points in 4Q23, with the recovery in export orders propelled by the beverage industry, the non-metallic minerals sector, other manufacturing, and the repair and installation sector.

It said the 29% increase in export orders is favoured by the fact that monetary policy in major economies is no longer being tightened, and stimulus measures are beginning to take effect.

For 21% of companies, export orders remain unchanged, a notable improvement from the 38% reported in the previous quarter.

On the other hand, the proportion of companies whose foreign orders declined remained stable at 50%.

This is particularly evident in chemical and pharmaceutical products, electrical equipment, motor vehicles and transport equipment, it added.

For 2024, the report said Malaysia’ annual inflation rate was expected to range between 2.5% and 3%.

“The inflation outlook is highly subject to changes in domestic policy on subsidies and taxes, Bank Negara Malaysia’s (BNM) monetary policy, movements in global commodity prices and unanticipated shocks arising from geopolitical uncertainties in the Middle East,” it said.

The report said based on the latest Consumer Price Index (CPI) data released by the Department of Statistics Malaysia (DoSM), Malaysia’s inflation rate remained stable at 1.5% in December 2023.

The headline inflation has fallen below the 2% inflation target for four consecutive months after August, suggesting price stability in the Malaysian economy.

Annually, Malaysia’s inflation rate stood at 2.5% in 2023, a marginal decline from 3.3% in 2022.

It noted that the food and non-alcoholic beverages component, which contributed 29.5% to the total CPI weight, registered a YoY inflation rate of 2.3% in December 2023.

This inflation rate was approximately 1.5 times higher than the national average inflation rate of 1.5% in December 2023.

For the entirety of 2023, it noted that the annual inflation rate for food and non-alcoholic beverages component was 4.9%, roughly twice as high as Malaysia’s annual inflation rate of 2.5%.

The high inflation rate in the food component suggested that Malaysians — especially the low-income individuals and households (as food consumption generally constitutes a significant portion of their expenditure) — are facing considerable price pressure from food consumption.

Source: The Malaysian Reserve