Business sentiment continues to decline into 1Q19, says D&B Malaysia

Moving into 1Q19, D&B expects sentiments among local firms to moderate due to weaker growth within the external-oriented industries

By NG MIN SHEN / Pic By TMR

Business sentiment among Malaysian firms remains low going into the first quarter of 2019 (1Q19), with Dun & Bradstreet (M) Sdn Bhd’s (D&B Malaysia) quarterly study showing its second consecutive quarterly decline as leading indicators displayed strong signs of moderation.

According to D&B Malaysia, the overall Business Optimism Index (BOI) moderated to +8.92 percentage points in 1Q19 from +12.99 percentage points in 4Q18.

On a year-on-year (YoY) basis, the BOI was slightly higher at +8.92 percentage points in 1Q19 compared to +7.25 percentage points in 1Q18.

“Moving into 1Q19, we expect sentiments among local firms to moderate due to weaker growth within the external-oriented industries such as wholesale trade, as well as the muted outlook among construction and mining firms.

“For 2019, however, firms have anticipated higher investments for business expansion compared to the previous year.

“This is particularly in the area of technological investments in software, infrastructure and machinery and capital equipment,” D&B Malaysia CEO Audrey Chia said in a statement yesterday.

In the statement, D&B Malaysia said only two of the six indicators measured by the quarterly study showed improvement on a quarter- on-quarter basis.

Inventory levels jumped to +8.82 percentage points in 1Q19 from +1.96 percentage points in 4Q18, while employment levels inched upwards to +10 percentage points from +9.8 percentage points previously.

However, volume of sales plunged to +7.06 percentage points in 1Q19 from +25.98 percentage points in 4Q18, while net profits sank to +8.82 percentage points from +15.69 percentage points.

Selling price fell to +2.94 percentage points in 1Q19 from +7.35 percentage points in 4Q18. New orders were lower at +15.88 percentage points in 1Q19 versus +17.16 percentage points in the immediate preceding quarter.

On a YoY basis, volume of sales dropped to +7.06 percentage points in 1Q19 from +9 percentage points in 4Q18, while selling price slipped to +2.94 from +5.5 previously.

Net profits climbed to +8.82 percentage points in 1Q19 from +5.5 a year ago, as inventory levels rose to +8.82 percentage points from +8 in 1Q18.

Employment levels improved to +10 percentage points for 1Q19 from +8 percentage points in 1Q18, while new orders jumped to +15.88 percentage points in 1Q19 from +7.5 in the 1Q of last year.

The transportation, services and wholesale sectors emerged as the most upbeat sectors for 1Q19, while the construction and mining sectors were least optimistic.

Firms are also more upbeat on investments for business expansion in 2019 compared to 2018, with the survey observing a “visible jump” in firms expecting investments to increase from 18% in 2018 to 26% in 2019.

Meanwhile, the proportion of firms expecting investments to decrease fell further to 7% in 2019 from 15%. The majority of local firms anticipated investments to remain unchanged at 67%.

The most important area of investment for 2019 is in machinery and capital equipment, followed by investments in information technology and skills upgrading of employees.

Increased competition is the main challenge in 2019 faced by local firms, with higher business cost and global uncertainties in second and third place respectively.

The D&B’s BOI is a quarterly mea-sure of business confidence in the economy, based on a business sentiment survey designed to capture the business expectations of 200 business owners and senior executives across major sectors in Malaysia.