Malaysian businesses turn optimistic on short-term outlook for economy: MIER

KUALA LUMPUR: Malaysian businesses have turned optimistic on the short-term outlook for the economy with stronger sales in the manufacturing sector, while consumer sentiment was only slightly improved though far from optimistic, compared with the last quarter of 2016, the Malaysian Institute of Economic Research (MIER) quarterly surveys reveal.
The quarterly business conditions and consumer sentiments surveys showed that businesses turned positive on the short-term outlook for the first time in 10 quarters in the first quarter of 2017, while consumer sentiment was still bogged down by issues to do with personal finances and labour market conditions remaining flat due to dim job prospects.
The Business Conditions Index (BCI) samples over 350 manufacturing businesses incorporated locally and foreign manufacturing concerns operating in Malaysia, covering 11 industries, while the Consumer Sentiments Index (CSI) is a sample of over 1,200 households in Peninsular Malaysia to gauge consumer spending trends and sentiments.
MIER indicated that the BCI reached 112.7 points in Q1 2017, up from 81.2 points in the fourth quarter of 2016, due to factors such as stronger sales in the manufacturing sector, expansion of production levels due to higher domestic orders and exports picking up. This was further supported by lower stock levels, step-up in capacity utilisation, higher wage cost and higher local sales prices.
The CSI, however, still stood way below the optimism level at 76.6 points after increasing by 6.8 points from fourth quarter 2016.
MIER said consumer anxiety over escalating prices seems to be abating though, and some respondents are looking to spend, although cautiously, as respondents see this as a good time to buy or invest in major items.
The survey also indicated that as at Q1 2017, consumers seem to have set their eyes on housing as part of their spending plans.
“ Most of the household debts are on residential property. If we look at the property market itself, most high-end properties are not affordable as our income is low,” MIER executive director Prof Datuk Dr Zakariah Abdul Rashid said at the 22nd Corporate Economic Briefing here yesterday.

He said this is prevalent among those who are just entering the labour market but at the same time it is vital for consumers to spend more to boost economic growth.
Zakariah said the dilemma of the situation is that households are not earning enough to spend more or do not have enough savings to do so.
He said this is a matter of concern, as household consumption is an index of domestic demand, which is an engine for economic growth.
Similarly, according to Zakariah, there is “not much room for government to manoeuvre with its spending” which is another index of domestic demand, as fiscal revenue is highly dependent on tax collection from the Goods and Services Tax and crude oil.
“Most of the revenue goes to operating expenditure, and not much is left to spend on development expenditure,” he added.
The ringgit, which has seen reduced fluctuation, is not expected to improve, as market players are influenced by non-economic factors such as speculation, as well as political factors like the upcoming general election, he added.