Mier: Economy in good shape

  • Business
  • Wednesday, 21 Jan 2004


A NUMBER of surveys conducted by the Malaysian Institute of Economic Research (Mier) have shown that major components of the economy were healthier in the fourth quarter of last year. 

Consumer sentiment reached its highest level in three years with people feeling good about economic and personal prospects, and surveys on the manufacturing, property, tourism and retail trade suggested that the economy was growing strongly, said the think-tank. 

“While current finances continue to hold their own, expected finances and employment prospects are the main drivers of confidence this quarter,'' said Mier in its quarterly consumer sentiment survey. 

Dr Mohamed Ariff, executive director of the Malaysian Institute of Economic Research presenting the think-tank's Malaysian Economic Outlook 2004 and 4th Quarter 2003 update

Mier's consumer sentiment index gained 2.7 points to 115.5 in the fourth quarter of last year, bolstered largely by the expectations component of the index. 

The research outfit said there was no change in consumers' present income, but steady finances were expected. 

“Although there are still those who complain of poor finances, the 5% polled this time is actually the lowest in almost nine years, suggesting that finances are clearly on the mend,'' said Mier. 

Demand for labour is slowly turning the corner. Job growth in the fourth quarter of 2003 may not be much to get excited about, but more consumers are a good deal more optimistic about the job outlook in the next quarter or two. 

With consumer sentiment etching some modest growth, business conditions, too, improved; although at a more modest pace in the fourth quarter. 

Mier's business conditions index rose 0.1 point to 109.8 to stay above the 100-point threshold for the third straight quarter. A reading below 100 would indicate deteriorating business conditions. 

“The improvement in the index was supported by gains in most of the components that make up the index,'' said Mier. “Comparing quarter-on-quarter, all but two components comprising the index recorded higher growth.'' 

The survey showed that the majority of manufacturers managed to maintain their sales volume towards year-end, and a greater percentage managed to increase sales. 

Mier said companies selling textiles and apparel, non-metallic products and electronics and electrical products managed to increase sales substantially during the fourth quarter. 

Despite an increase in sales volume, production growth eased in the fourth quarter with nearly 40% of manufacturers pulling back on output. 

Sectors that saw the biggest pullback were chemicals and chemical products, and transport equipment and machinery. 

Mier said there was also a slight dip in local sales orders, with much of the drop attributable to the decline in sales of passenger cars. 

On employment by businesses, Mier said intakes by firms were less active in the fourth quarter but wage costs increased by 27% during that time. 

“Looking ahead, although most of the employers are determined to contain wages, 34% of employers are anticipating higher salary adjustments, in line with the handing out of increments and bonus payments,'' said Mier. 

It added that sectors that were likely to contribute to growth in the manufacturing sector in the near-term include the construction and the electrical and electronics sectors. 

“Higher demand for the country's electrical and electronic exports, which is the key driver for manufacturing growth, will also generate more business spin-offs to many local industries,'' said Mier. 

“The continued pickup in the residential property market will encourage higher orders for construction materials such as cement, lime products, tiles, bricks, glass and porcelain products.'' 

Mier said although the residential property market did not close 2003 with a bang, it was a good quarter for most developers. 

“Residential property builders are, thus, more optimistic about current business activity but remain cautiously confident about their prospects in the coming months,'' said Mier. “Demand for new homes is also leading a resurgence in residential construction.'' 

Its residential property survey report showed that the total amount of unsold units declined in the fourth quarter  

“Although 54% of the respondents did not see any change in their sales volumes in the fourth quarter of 2003, more are reporting selling more this time than in the previous quarter,'' said Mier. 

On tourism, the institute said its travel agencies index and hotel operators index were substantially higher year-on-year, and expanding. An increase in hotel occupancy was experienced by 44% of respondents. 

“The sturdy increase in the number of foreign travellers also provides evidence of an improvement in the tourism scene. 

“This is good news for industry players, as they stand to reel in positive gains from the growth in the tourism industry,'' said Mier. 

The think-tank said its survey on the retail sector suggests that the sector will continue to progress although its performance, relative to the previous quarter, is likely to be quieter. 

On its survey on the automotive industry, Mier said more respondents expect sales and production to improve somewhat in the first quarter of 2004 compared with the same period in 2003, but said the general increase in car prices will dampen sales prospects. 

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