Malaysia in Recovery Phase
By LAALITHA HUNT
PETALING JAYA: The strong performance of economic indicators in October reaffirms the view that the Malaysian economy has entered into a recovery phase.
This is due to the Government’s fiscal boost, resilient private consumption growth, a pick-up in manufacturing activity and improvements in global trade, according to CIMB Research.
The strong expansion of 10.4% in October (against 6.6% in Sept) in Malaysia’s leading index (LI), a forward gauge of economic expectations, was among the positive macro signposts, the bank-backed research house said in its latest update.
On a month-on-month basis, the LI also increased 2.3% in October, versus a contraction of a half percentage point in September.
“The overall index was lifted mainly by a 0.7% increase in new companies’ registration, 0.6% gain in ratio of price-to-unit labour costs in manufacturing sector as well as a 0.6% rise in the number of housing permits approved in the month,” the report said.
The LI is a composite index consisting of several key economic variables tested for their significance as a leading indicator.
These variables include real money supply, Bursa Malaysia Industrial Index, number of new company registrations and total trade with major trading partners.
The LI is considered a useful tool to predict the likely direction of the economy in the next six to nine months. For example, a rising trend of the LI signals economic expansion ahead and vice versa.
Meanwhile, the coincident index (CI), which measures the present state of the country’s economy, improved from a revised minus 0.1% in September to a 4.2% growth in October.
“This is the largest monthly gain since January last year,” the report said.
On a month-on-month basis, the CI rose 2.1% against a revised minus 0.7% in September.
“All the components of the CI (such as the industrial production index) contributed positively to the index, with main contributions coming from the real salaries and wages in the manufacturing sector (0.5%) and real sales in this sector (0.5%),” CIMB Research said.
The report also noted that the global Organisation for Economic Co-operation and Development leading indicators had been on an uptrend for the eigth consecutive month since February, signalling the broadening base of recovery in both the developed and emerging economies.
Based on these positive indicators, CIMB Research estimates Malaysia’s real gross domestic product growth to gain 2% year-on-year in the fourth quarter (compared to the prior estimate of 1.8%), resulting in an overall GDP contraction of 2.3% for this year.
“For 2010, we project a higher GDP growth of 3.5% on a firmer recovery in domestic demand and exports,” the report said.
PETALING JAYA: The strong performance of economic indicators in October reaffirms the view that the Malaysian economy has entered into a recovery phase.
This is due to the Government’s fiscal boost, resilient private consumption growth, a pick-up in manufacturing activity and improvements in global trade, according to CIMB Research.
The strong expansion of 10.4% in October (against 6.6% in Sept) in Malaysia’s leading index (LI), a forward gauge of economic expectations, was among the positive macro signposts, the bank-backed research house said in its latest update.
On a month-on-month basis, the LI also increased 2.3% in October, versus a contraction of a half percentage point in September.
“The overall index was lifted mainly by a 0.7% increase in new companies’ registration, 0.6% gain in ratio of price-to-unit labour costs in manufacturing sector as well as a 0.6% rise in the number of housing permits approved in the month,” the report said.
The LI is a composite index consisting of several key economic variables tested for their significance as a leading indicator.
These variables include real money supply, Bursa Malaysia Industrial Index, number of new company registrations and total trade with major trading partners.
The LI is considered a useful tool to predict the likely direction of the economy in the next six to nine months. For example, a rising trend of the LI signals economic expansion ahead and vice versa.
Meanwhile, the coincident index (CI), which measures the present state of the country’s economy, improved from a revised minus 0.1% in September to a 4.2% growth in October.
“This is the largest monthly gain since January last year,” the report said.
On a month-on-month basis, the CI rose 2.1% against a revised minus 0.7% in September.
“All the components of the CI (such as the industrial production index) contributed positively to the index, with main contributions coming from the real salaries and wages in the manufacturing sector (0.5%) and real sales in this sector (0.5%),” CIMB Research said.
The report also noted that the global Organisation for Economic Co-operation and Development leading indicators had been on an uptrend for the eigth consecutive month since February, signalling the broadening base of recovery in both the developed and emerging economies.
Based on these positive indicators, CIMB Research estimates Malaysia’s real gross domestic product growth to gain 2% year-on-year in the fourth quarter (compared to the prior estimate of 1.8%), resulting in an overall GDP contraction of 2.3% for this year.
“For 2010, we project a higher GDP growth of 3.5% on a firmer recovery in domestic demand and exports,” the report said.
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