Business sentiment improves slightly for 3Q20

by AFIQ AZIZ/ pic by RAZAK GHAZALI

BUSINESS sentiment among Malaysian companies has improved slightly despite remaining in the contractionary zone for the third quarter of 2020 (3Q20).

According to Dun and Bradstreet (D&B) Malaysia’s Business Optimism Index (BOI) study that was released yesterday, the overall BOI rose by 8.53 percentage points from -21.86 percentage points in 2Q20 to -13.33 percentage points in 3Q20.

On a year-on-year basis, BOI fell by 20.55 percentage points from +7.22 percentage points in 3Q19 to -13.33 percentage points in 3Q20.

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

The study also revealed that volume of sales increased slightly from -27.84 percentage points in 2Q20 to -19.2 percentage points in 3Q20 with net profit jumping from -40.2 percentage points in 2Q20 to -22.4 percentage points in 3Q20.

BOI for selling price inched up from -10.31 percentage points in 2Q20 to -7.2 percentage points in 3Q20.

Meanwhile, new orders had also risen from -26.8 percentage points in 2Q20 to -12 percentage points in 3Q20.

The inventory levels rose from -20.62 percentage points in 2Q20 to -8.8 percentage points in 3Q20.

It is also noted that the employment levels jumped from -5.21 percentage points in 2Q20 to -10.40 percentage points in 3Q20.

Looking ahead, D&B said the financial and mining sectors are the most upbeat for 3Q20, while the services, manufacturing and wholesale sectors are the most pessimistic.

D&B CEO Audrey Chia said she is expecting the sentiment to improve slightly in coming months with the gradual resumption of economic activities and interstate travels.

“The government’s fiscal and monetary stimulus packages will help stimulate economic growth, with some expected recovery towards the end of the second half of 2020.

“However, growth across the majority of sectors is expected to remain muted, with continued contractions seen in services, wholesale trade and manufacturing,” said Chia.

The government had eased the Movement Control Order (MCO) which came to force on March 18 twice via Conditional MCO (CMCO) and Recovery MCO (RMCO) on May 4 and June 10 respectively to regenerate businesses sectors.

The government acknowledged that the economy bled RM2.4 billion a day for almost two months during the initial stages of the MCO.

During the CMCO and RMCO phases, businesses were allowed to operate, but must observe and comply with strict procedures by the health authority to curb the spread of Covid-19.

This has hampered many business sectors to remain downbeat for the next couple of months.

“The services sector has emerged as one of the most pessimistic sectors with all six indicators in the negative zone. However, the majority of the indicators have improved slightly,” the study said.

The main contributor that dragged down sentiments for the services sector is the job market, with employment levels tumbling to -12.9 percentage points in 3Q20 from -4.88 percentage points in the previous quarter.

The service sector index, volume of sales indicator increased from -34.14 percentage points in 2Q20 to -29.03 percentage points in 3Q20 and net profit inched up from -34.15 percentage points to -33.87 percentage points over the same period.

Inventory levels remained contractionary, up from -17.07 percentage points in 2Q20 to -14.52 percentage points in 3Q20.

The manufacturing sector is downbeat with five indicators of six indicators increasing upwards in the contractionary zone for 3Q20, while the wholesale sector is also downbeat with four of six indicators in the negative zone.

The financial and mining sectors, however, remain optimistic, according to the study.

D&B said the financial sector has emerged as one of the most optimistic sectors with 3 indicators in the positive zone, while new orders increased from -80 percentage points in 2Q20 to zero percentage point in 3Q20. All six indicators have increased downwards for the financial sector.

As for the mining sector, D&B described it as one of the optimistic sectors with 3 of the total indicators in the expansionary zone. Of the six, five indicators have risen for the 3Q20 period.

“Volume of sales increased from zero percentage point in 2Q20 to +33.33 percentage points in 3Q20, while net profit rebounded from -20 percentage points in 2Q20 to +33.33 percentage points in 3Q20.

“Selling price fell from -20 percentage points in 2Q20 to -66.67 percentage points in 3Q20 and inventory levels jumped from -60 percentage points in 2Q20 to zero percentage point in 3Q20.

“Employment levels increased from -20 percentage points in 2Q20 to +33.33 percentage points in 3Q20, while new orders increased from -60 percentage points in 2Q20 to zero percentage point in 3Q20,” the study said.