Malaysian business outlook remains slightly hopeful for 3Q17

by NG MIN SHEN

Malaysian business sentiments remain marginally optimistic for the third-quarter this year (3Q17), with the outlook on the majority of sectors easing slightly.

Dun & Bradstreet (D&B) Malaysia’s Business Optimism Index (BOI) study found that the overall BOI increased slightly to 3.4% in 3Q17 compared to 3.07% in 2Q17, although it eased on a year-on- year (YoY) basis from 4.42% in 3Q16.

D&B CEO Audrey Chia said the continued optimism displayed by local businesses in 3Q17, particularly in the services sector, was largely attributable to spurt in private investment growth, firmer private consumption and higher government spending, resulting to fuelled domestic demand.

Credit growth remained buoyant, with manufacturing and transportation sectors recording the fastest growth.

“However, some measure of fiscal restraint will weigh on the Malaysian economy in the coming quarters as the government strives to keep its budget deficit target to 3% of gross domestic product (GDP) for the financial year 2017,” Chia said.

“The recent downward moderation of commodity prices has also posed downside risks to the growth outlook given that Malaysia is a large net oil exporter and producer of other commodities. Hence, we anticipate sentiments within the mining sector to remain muted,” she added.

The quarterly study includes six business indicators — volume of sales, net profits, selling price, inventory level, employees and new orders.

Three of the six indicators moderated upwards on a quarter-on-quarter (QoQ) basis. Volume of sales rose to 3.88% in 3Q17 from 2.99% previously, while new orders climbed QoQ to 8.74% in 3Q17 from 3.48% and employment levels jumped to 3.88% in 3Q from -0.49%.

Net profits remained in the contractionary zone, sliding to -3.88% in 3Q17 from -3.48% in 2Q17. Selling price tumbled to 2.91% in 3Q from 10.95% in the prior quarter as inventory levels dropped QoQ to 4.85% from 4.98%.

On a yearly basis, selling price grew to 2.91% in 3Q17 from 0.5% a year ago, while inventory levels increased to 4.85% in the same quarter from 1.5% last year.

Employment levels also rose to 3.88% in 3Q17 from 3% the year before.

However, volume of sales fell to 3.88% in 3Q17 from 6% in 3Q16. New orders also declined YoY to 8.74% in 3Q17 from 9%, and net profits contracted to -3.88% in 3Q from 6.5% last year.

The services, transportation and agricultural sectors were the most upbeat for 3Q17 with five indicators each in the positive region.

Despite this, four of six indicators for the services sector moderated downwards, namely volume of sales at 5.13% in 3Q17 versus 6.49% in 2Q17, selling price at 1.28% versus 3.9%, new orders at 7.69% versus 15.58% and inventory levels at 3.85% versus 6.49%.

Net profits remained contractionary at -1.28% in 3Q17 compared to -5.2% in 2Q17, while employment levels climbed QoQ to 5.13% in 3Q from 1.3% previously.

For the transportation industry, volume of sales and inventory levels both fell to 4.76% in 3Q17 versus 5% in the immediate previous quarter, while selling price and employment levels each also fell to 9.52% in 3Q17 versus 10% in 2Q17.

Net profits fell into the contractionary zone at -19.05% for the 3Q versus 15% in 2Q17, although new orders increased QoQ to 9.52% in 3Q17 from 5% previously.

Two of six indicators declined for the agricultural sector in 3Q17 versus 2Q17, namely inventory levels at 60% versus 80% and employment levels at 0% versus 80%.

Volume of sales, net profits and new orders are expected to maintain the same optimism levels at 40% in 3Q this year. Selling price is expected to register at 80%.

Construction emerged as the least optimistic sector for the 3Q, with only volume of sales remaining in the positive zone at 11.11% compared to 25% in 2Q17.

Net profits are expected to remain unchanged at 0%. Selling price, new orders and inventory levels have each fallen to 0% in 3Q17 from 12.5% in 2Q17, while employment levels contracted to -11.11% in 3Q17 versus 12.5% a quarter ago.

In the mining sector, selling price fell to -25% for the 3Q from 20% in 2Q17, while inventory levels dropped to -25% from -20%. Employment levels declined to -25% in 3Q17 from -40% in 2Q17.

Meanwhile, volume of sales and net profits both rose to 25% in 3Q17, from -40% and -60% respectively in 2Q17.

New orders are expected to rise to 0% in 3Q17 compared to -20% in 2Q17.

The D&B BOI is a quarterly measure of business confidence in the economy, surveying 200 business owners and senior executives representing major industry sectors across the country on their business expectations.