BUSINESS Conditions Index (BCI) for the fourth quarter of 2021 (4Q21) indicates that manufacturers have begun to regain confidence, said The Malaysian Institute of Economic Research (MIER).
According to the research outfit, the 4Q21 index showed a positive outlook, rising by 25 points to settle at 122, well above the 100-point threshold. The index increased by 6.6 points on a year-on-year basis compared to 4Q20.
“After a two-year decline, consumer spending began to rise as a result of a better economic outlook. Spending followed the broader economic recovery as higher vaccination rates in 4Q21 allowed more localities to lift restrictions that have hampered retail sales.
“This was attributed to an increase in domestic and export demand, which resulted in a significant increase in sales and a rise in industrial production volume. Other factors contributing to the increase included a slight increase in capital investment and capacity utilisation as well as an improvement in employment conditions,” according to the BCI.
Rise in Domestic Orders
Domestic orders have increased dramatically this quarter, with the sub-index having increased 37.6 points to settle at 71.4 points. In 4Q21, more than half of respondents (52%) reported an increase in domestic orders, despite weak local demand in industries producing paper and paper products.
Orders for metal products — motor vehicles and transportation equipment on the other hand — had generally increased in line with good sales performances.
“Although demand was moderate in this quarter, more than half of the manufacturers polled (71.4%) expected domestic orders to increase in the next three months.
“Local demand is expected to rise for industries producing rubber, plastics, metals, machinery and equipment, electrical equipment, motor vehicles and transportation equipment,” it added.
Stock Levels Not Picking Up
According to the survey, stock levels among the manufacturers polled are generally not increasing, except for the paper and paper products, non-metallic mineral products and furniture industries, which increased their inventories.
Forty-one percent of respondents reported unchanged inventories, which included manufacturers of leather and related products, electrical equipment, other manufacturing and repair and installation of machinery and equipment, plastics and metal products.
Better Job Prospects
The report added that in 4Q21, employment conditions improved significantly compared to the previous quarter. 32% of firms reported that the number of their employees had increased, which is consistent with sentiments in 1Q21.
Notably, the number of jobs lost due to layoffs totalled 23%, a significant increase of 8% from the previous quarter.
Companies producing metal products and other manufacturing, and repair and installation of machinery and equipment, increased their employability in response to strong sales performance.
Unchanged employment was documented in some industries — paper and paper products, non-metallic mineral products and machinery and equipment — as a result of unchanged production volume.
Some 65% of employers surveyed planned to maintain their headcount, employment prospects are likely to remain stable in the coming quarter.
The relaxation of restrictions and reopening of most sectors is critical for Malaysia’s recovery; business operations would require time to ramp up to pre-pandemic capacity due to the prolonged lockdown. The fight against Covid-19 may not be over. However, better business prospects are anticipated in the coming quarter.