The decline in consumers’ finances may be attributed to Bank Negara Malaysia’s decision to raise the overnight policy rate in Q2 2023, says MIER.
PETALING JAYA: Business optimism and consumer sentiment in Malaysia appear to be on a downward trajectory, based on surveys conducted in the second quarter (Q2 2023) of this year by the Malaysian Institute of Economic Research (MIER).
The economic think tank’s consumer sentiment index (CSI) continued its negative trend in the second quarter, falling 8.4 points to 90.8 quarter-on-quarter (q-o-q).
The survey indicated a growing sense of pessimism, which is evident in participants’ predictions regarding future employment prospects, income advancement, and anticipated inflation rates. This does not augur well for an economy that is traditionally well supported by domestic consumption.
Nonetheless, the CSI rose by 4.8 points on a year-on-year (y-o-y) basis, it said in a statement today.
Likewise, the general downtrend is noticeable in MIER’s employment index, showing a decrease of 7.4 points in Q2 to 102.4 points compared to the previous quarter (Q1 2023) and a drop of 7.8 points from the same period a year ago.
In tandem with this, the survey revealed other contributing factors such as deteriorating individual financial situations, pessimism on future finances and job opportunities, lower confidence in income growth, as well as lower spending plans following the decline in the CSI and employment index.
The decline in consumers’ current finances may be attributed to Bank Negara Malaysia’s decision to raise the overnight policy rate (OPR) in Q2 2023.
“Furthermore, the constantly elevated inflation level would have raised the cost of living of respondents,” it stated.
Companies are more pessimistic
MIER said business optimism decreased in Q2 2023 as revealed by a decline in indicators for sales, domestic orders, external demand, industrial production volume, and inventory levels. This reversed the positive trend in Q1 2023.
“MIER’s business conditions index (BCI) dropped 13 points to 82.4 points, the lowest level since Q2 2023. On a yearly basis, the BCI dropped 13.8 points from 96.2 points in Q2 2022,” it said.
Furthermore, businesses seem to hold a negative outlook concerning the state of business conditions. “The BCI Expected Index for Q2 2023 decreased to 94.3 points from 115.8 points in the previous quarter.”
The industrial production index has similarly declined, dropping 8.6 points quarter-on-quarter to 39.2 points in Q2. It dropped 15 points compared to the same quarter a year ago.
In general, the survey reported unfavourable indications in terms of sales and employment during the second quarter.
“The ongoing global uncertainties coupled with elevated inflation and supply chain disruption has placed Malaysia in a vulnerable position.
“It is important that Malaysia, as a small and open trading economy, figure out solutions to address these concerns,” MIER stressed.
MIER’s BCI survey encompassed more than 350 domestically established manufacturing enterprises and foreign manufacturing companies operating within Malaysia, according to its website.