RHB | Malaysia | Business Conditions Picked Up But Consumer Sentiment Fell Further In 1Q

Economic Research	23 April 2015
Malaysia
Economic Highlights
Business Conditions Picked Up But Consumer Sentiment Fell Further In 1Q The Malaysian Institute of Economic Research’s (MIER) business conditions index (BCI) bounced back by 14.5 percentage points to 101.0 in 1Q 2015, after falling by 9.5 percentage points to 86.4 in 4Q 2014 (see Figure 1). This was above the 100.0 point threshold and the first increase in three quarters, suggesting that business conditions improved during the quarter. The improvement was on account of healthy sales at the start of the year, boosted probably by pre-Goods & Services Tax (GST) purchases. This was aided by growth in domestic demand and export orders, while business activity is projected to accelerate in the coming quarters, driven by increases in production and higher external demand for manufactured goods. Indeed, manufacturing production inched up to 5.3% in January-February 2015, from +5.0% in 4Q 2014, suggesting that production was still holding up in tandem with a pick-up in demand due to pre-GST buying even though manufactured exports contracted by 3.0% y-o-y during the period. Although the BCI picked up in 1Q 2015, we believe businesses will likely remain cautious in spending. On balance, we still expect private investment to slow down to 8.5% in 2015, after recording a more moderate growth of +11.0% in 2014. Growth will likely be supported by the ongoing implementation of sizeable and long gestation infrastructure related projects under the various economic programmes. The implementation of the GST, however, is expected to weigh on growth. In addition, the full effect of policy tightening over the two previous years to address household indebtedness and speculative activities in the property sector will also be felt this year. Economist:  Peck Boon Soon  | +603 9280 2163
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