Home > Archives
Published: Friday October 31, 2008 MYT 6:53:00 AMUpdated: Friday October 31, 2008 MYT 12:04:16 PM
By YEOW POOI LING
KUALA LUMPUR: More than half of Malaysians have reduced “impulse” purchases and postponed major life decisions, reports StarBiz's Yeow Pooi Ling.
The AP meanwhile reported from Washington that scared and out of money, Americans stopped buying everything from cars to corn flakes in the July-September quarter, ratcheting back spending by the largest amount in 28 years and jolting the national economy into what could be the most painful recession in decades.
Yeow Pooi Ling reports that Malaysians are delaying getting married, having children, moving house, changing jobs or furthering their education due to the current downbeat economic conditions, according to a recent poll by Synovate Research.
Nevertheless, 45% were optimistic that the weak economy would improve soon while only 22% thought the economy was going downhill and that the domestic economy would worsen before it recovers.
Synovate’s survey, conducted two months ago, reviewed the spending habits and perceptions of Malaysians on the economy over six months to August. The survey was also done in Japan, Taiwan, Brazil, the US, France, Russia, Turkey and South Africa.
Synovate Malaysia managing director Steve Murphy said Malaysians had a more positive outlook on the economy compared to developed countries.
For example, almost two-thirds of Americans (63%), Japanese (63%) and French (64%) felt their economy would get worse before rebounding, he said after a media briefing yesterday.
“Malaysians’ optimism is merited as the banking system is regulated,” Murphy said.
Nonetheless, given the barrage of negative news over the last two months, more Malaysians could feel more pessimistic by now, he added.
In the six months to August, 36% of Malaysians were saving less, 25% investing less and generally reducing their spending on basic necessities and especially luxury items.
This was attributed to the lower disposable income given that food and energy prices had increased while salary saw little difference, Murphy said.
Almost half the respondents were earning almost the same as before, 26% were taking home less salary while 15% saw a pay rise during the six-month period.
Top of the list of items that Malaysians were willing to give up were holidays and leisure travel (18%), branded items (13%), eating out (12%) and purchases of big-ticket items (12%) like houses and cars.
Murphy said instead of getting a new car, the average Malaysian was more likely to consider a second-hand, or a lower range, vehicle.
Some 31% of Malaysians deemed to be affluent, i.e, those with monthly income of RM4,000 and above, indicated they had the intention to buy a new car in the next 12 months.
Affluent Malaysians have continued to invest this year with investment in unit trusts and mutual funds increasing to 40% in first half of the year from 29% a year ago.
Investments in residential and commercial property investment rose to 29% from 21% in the same period.
Murphy said the affluent believed that they would be cushioned during tough times.
“But this is a small segment of society. The majority of people would tighten their belts,” he added.
Synovate surveyed 1,000 respondents from urban and rural areas, as well as major cities in the country.
Meanwhile, Perusahaan Otomobil Kedua Sdn Bhd (Perodua) managing director Datuk Syed Hafiz Syed Abu Bakar said the automaker had yet to feel the change in consumer sentiment, as sales numbers for its economical vehicles remained strong for September and October.
“October hasn’t ended yet but about 15,000 (units) have been booked so far,” he told StarBiz in a telephone interview.
Mutiara Goodyear Development Bhd, which develops mostly mid-range properties, had seen a take-up rate of over 70% for its Prima Avenue commercial project in Petaling Jaya since the launch in mid-August, said chief executive officer Kee Cheng Teik.
Prima Avenue comprises two towers of office suites and retail lots selling at RM170,000 onwards with a total gross development value of RM120mil.
Buyers were mainly property investors and young entrepreneurs starting their business, he said.
But health food company Hai-O Enterprise Bhd is seeing weaker demand from its Chinese customers.
Financial controller Hew Von Kin said Chinese medicated halls, which got their supplies from Hai-O, were stocking less in anticipation of slower demand.
“The Chinese are usually more sensitive and cautious during an economic slowdown,” he said, adding that its multi-level marketing business was still resilient.
Under a headline "Economy jolts into decline; bad recession seen" the AP reported that scared and out of money, Americans stopped buying everything from cars to corn flakes in the July-September quarter, ratcheting back spending by the largest amount in 28 years and jolting the national economy into what could be the most painful recession in decades.
With retailers bracing for a grim holiday buying season, the economy isn't just slowing; it's actually shrinking, the government confirmed Thursday.
It reported that the U.S. gross domestic product declined at an annual rate of 0.3 percent in the year's third quarter and consumers' disposable income took its biggest drop on record.
In simpler words, "The train went off the tracks,'' said Brian Bethune, economist at IHS global Insight.
Wall Street took comfort in the fact that it wasn't even worse.
The Dow Jones industrials rose 190 points.
But economists say tougher times are still ahead.
Believing consumers are cutting back even more right now, they predict a much larger economic decline - anywhere from a 1 to 2 percent rate - during the current October-December period.
That would meet a classic definition of a recession - two straight quarters of shrinking GDP.
Not that there's any real doubt now.
Clobbered by pink slips, shrinking nest eggs and falling home values - consumers are holding ever tighter to their wallets.
The new report said Americans' disposable income fell at an annual rate of 8.7 percent in the quarter, the largest in records dating back to 1947.
The dismal news came just days before the nation picks the next president.
Whether Democrat Barack Obama or Republican John McCain wins the White House, he will inherit a deeply troubled economy and a record-high budget deficit that could cramp his spending plans.
Each side said the new figures supported its political case.
"The decline in GDP didn't happen by accident - it is a direct result of the Bush administration's trickle down, Wall Street first, Main Street last policies that John McCain has embraced for the last eight years,'' Obama said.
He pledged to provide tax relief to middle class families and help people facing foreclosure.
Pointing to the economy's sad state, Doug Holtz-Eakin, senior policy adviser for the McCain campaign, shot back that "Barack Obama would accelerate this dangerous course.''
McCain said his tax cuts, free-trade policies and help to struggling homeowners would help turn things around.
More than in recent recessions, consumers - the lifeblood of the economy - are bearing the brunt of the country's housing, banking and other ailments.
The third-quarter decline in their spending was the first in 17 years, and the 3.1 percent annualized cutback was staggering - the most since the spring of 1980 when the country was in the grip of what some call the worst downturn since the Great Depression.
Walloped by such a huge pullback, the economy toppled into negative territory.
The latest reading on GDP, which measures the value of all goods produced within the United States, showed a rapid turn from the 2.8 percent growth rate logged in the second quarter.
The new figure was the worst since the 1.4 percent rate of decline in the third quarter of 2001, when the nation was suffering through its most recent recession.
Democrats on Capitol Hill are pushing for another economic stimulus package and are weighing whether to hold a lame duck session before the new president takes office.
Under attack from Democrats and Republicans alike, the White House defended giving billions of bailout dollars to banks that now are rewarding shareholders and executives - or even buying other banks - rather than making loans to consumers and businesses.
Ed Lazear, chairman of the Council of Economic Advisers, said the government is keeping close tabs on banks' use of the money, but he also said normal activities such as paying performance-related salaries or distributing dividends are allowed under the law Congress passed.
White House press secretary Dana Perino said that "not only rich people get dividend payments,'' which can form a significant portion of income for retirees and mutual funds.
A collapse of the housing market and locked-up lending have produced the worst financial crisis to hit the country in more than 70 years.
To cushion the fallout, the Fed slashed interest rates on Wednesday by half a percentage point to 1 percent, a level seen only once before in the last half century.
Fed Chairman Ben Bernanke has warned that the United States' economic weakness could last for some time - even if the government's unprecedented $700 billion financial bailout package and other steps do succeed in getting financial and credit markets to operate more normally.
"As of now, most forecasts indicate that we will experience a serious recession, perhaps comparable to the recession of the early 1980s, but nothing like the Great Depression,'' said Simon Johnson, former chief economist to the International Monetary Fund and senior fellow at the Peterson Institute for International Economics. During the 1980-1982 recession, unemployment topped 10 percent.
Other analysts, including Mark Zandi, chief economist at Moody's Economy.com, predicts the downturn will be much more severe than the 2001 and 1990-1991 recessions but not as bad - in terms of unemployment or lost growth - as the 1980s one.
The unemployment rate, now at 6.1 percent, could hit 8 percent or higher next year.
The Labor Department said Thursday that new claims for unemployment benefits last week held steady at 479,000, an elevated figure that continued to point to troubles in the jobs market.
In the third quarter, consumers cut back on purchases of cars, furniture, household appliances, clothes and almost everything else.
Businesses cut back, too, trimming spending on equipment and software at a 5.5 percent pace, the most since the first quarter of 2002.
And home builders slashed spending at a 19.1 percent pace, marking the 11th straight quarterly cutback.
Slower growth for U.S. exports - reflecting less demand from overseas buyers who are coping with their own economic problems - also factored into the weak GDP report.
Exports grew at a 5.9 percent pace in the third quarter, less than half the second quarter's 12.3 percent rate.
From Tokyo AP reported that prices rose sharply and Japanese consumers spent less in September, the government said Friday.
Core inflation in the month surged 2.3 percent from a year earlier due to high fuel and food costs, according to the Ministry of Internal Affairs and Communications.
The result marks the 12th consecutive month of increase for the core consumer price index, which excludes fresh food prices but includes those for energy.
Core CPI for the Tokyo area rose 1.5 percent in October.
But so-called "core-core'' inflation, which excludes both food and energy, inched up 0.2 percent, suggesting that the recent fall in crude oil prices should ease prices in Japan in the months ahead.
September's higher prices dampened the mood among Japanese consumers, who curtailed spending during the month.
Average monthly household spending fell 2.3 percent from a year earlier to 281,433 yen ($2,862), the government said Friday in a separate report.
Although the figure beat the 3.4 percent average decline forecast by Kyodo news agency, the fall is nonetheless bad news for an economy underpinned largely by consumer spending.
Individual spending accounts for more than half of Japan's gross domestic product.
In another government report, Japan's seasonally adjusted unemployment rate in September stood at 4.0 percent, down 0.2 percentage point from the previous month.
The number of jobless increased by 20,000 to 2.71 million, the Ministry of Internal Affairs and Communications said
Latest Financial Meltdown, NYSE, NASDAQ and other business news, pictures, videos, audios and charts from the AP-Wire
For latest MSEB indices, charts and other information click here
Nasdaq Stock Market: http://www.nasdaq.com
Hong Kong Stock Exchange
Japan's Tokyo Stock Exchange
Copyright © 1995-2014 Star Publications (M) Bhd (Co No 10894-D)