Business confidence down in 4Q19 on trade-related uncertainties

Persistent trade tensions and commodity-related shocks will continue to place pressure on Malaysia, says Chia


BUSINESS confidence in Malaysia’s economy decreased from a year ago amid ongoing uncertainties due to external factors, a study by Dun & Bradstreet Malaysia Sdn Bhd (D&B) showed.

D&B’s Business Optimism Index (BOI) declined 3.41 percentage points year-on-year (YoY) to 9.58 percentage points in the fourth quarter of 2019 (4Q19), from 12.99 percentage points in the same quarter last year.

“While we are expecting a relatively positive outlook ahead, there remains much uncertainty as the trade-related sectors are vulnerable to external factors and heavily reliant on the global economy,” CEO Audrey Chia said in a statement yesterday.

On a quarter-on-quarter (QoQ) basis, however, D&B’s BOI rose 2.36 percentage points to 9.58 percentage points for 4Q19, versus 7.22 percentage points in 3Q19.

“Persistent trade tensions and commodity-related shocks will continue to place pressure on Malaysia to expand its export market to reduce its dependence on its existing export pool.

“However, the transport, agriculture and services sectors are expected to provide growth support to the economy in the near-term,” Chia added.

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

On a YoY basis, just one of the six indicators posted growth for 4Q19.

New orders climbed to 21.67 percentage points in the current quarter from 17.16 percentage points in 4Q18.

However, volume of sales moderated to 23.33 percentage points in 4Q19 from 25.98 percentage points last year.

As such, net profits decreased to 9.17 percentage points in 4Q19 from 15.69 percentage points in the last quarter of 2018.

Selling price plunged to 0.83 percentage points in 4Q19 from 7.35 percentage points the year prior.

Inventory levels plummeted to -1.67 percentage points in the last quarter of this year from 1.96 percentage points in 4Q18.

Employment levels also dropped to 4.17 percentage points in the current quarter from 9.8 percentage points last year.

For the final quarter of 2019, the agriculture, services and transportation sectors remain upbeat, while the wholesale trade sector is most downbeat.

Services has emerged as one of the most optimistic segments with five indicators, namely volume of sales, net profit, selling price, employment levels and new orders in the positive zone, albeit moderately declining.

The agriculture sector is also optimistic with five indicators in the expansionary zone, comprising volume of sales, selling price, inventory levels, employment levels and new orders.

The transportation segment has four indicators in the positive zone, with three of the six indicators — volume of sales, net profit and new orders — inching upwards.

For the wholesale sector, five of six indicators are in the negative zone, including net profits, employment levels, selling price, inventory levels and volume of sales.