PETALING JAYA: The business confidence index (BCI) is expected to post further recovery in the quarters ahead if the Covid-19 threat is kept under control and does not cause more damage.
The Malaysian Institute of Economic Research’s (MIER) BCI for the fourth quarter of 2021 indicates that manufacturers have begun to regain confidence.
“The fourth quarter’s index showed a positive outlook, rising by 25 points to settle at 122, which is well above the 100-point threshold.
“The index increased by 6.6 points year-on-year (y-o-y) compared to the same quarter of the previous year,” the MIER said in a statement.
The institute said businesses had increased their capacity utilisation as more workers are allowed to return to work.
Commenting on this latest development, Bank Islam Malaysia Bhd’s chief economist Dr Afzanizam Abdul Rashid (pic below) told StarBiz that the rise in the BCI was very much in tandem with Purchasing Managers’ Index for the manufacturing sector, which has stayed above the 50-point level since October 2021.
“This is also in line with the reopening of the economy since October last year.
“One of the key sub-index in the BCI is the capacity utilisation rate, which has gone up to 83.6% in the fourth quarter from 70.3% in the preceding quarter.
“Similarly, the capital investment index has risen by 7.1 points to 61.8 points during the final quarter of 2021,” he added.
The BCI’s manufacturing sales component sub-index surged dramatically by 32.9 points y-o-y to 71.7 points, and the MIER said this indicates that manufacturing sales had regained momentum.
“More than half or 52% of the manufacturers polled reported good sales in the current quarter, while only 9% reported poor sales,” it said.
It noted that good sales were reported in those industries producing leather and related products, chemicals and chemical products and pharmaceutical products, metal products, electrical equipment, motor vehicles and transport equipment.
Meanwhile, MIER said poor sales were only reported in industries producing paper and paper products, while half of the companies in non-metallic mineral products reported good sales.
It said sales in other industries such as rubber products, plastics products, machinery and equipment, furniture and other manufacturing, as well as repair and installation of machinery and equipment, remains satisfactory.
Economist Manokaran Mottain, who is also director at Rising Success Consultancy, told StarBiz that the BCI posted a strong recovery as all states moved to open up and eased restrictions in the fourth quarter of last year.
However, he noted that in the short term, he expects the BCI would still be “fluctuating”.
“This (rise in BCI) is a significant development which will be encouraging. Moving forward, I think the flood disasters and Covid-19 Omicron scare will tend to take away some of these gains.
“I expect the BCI will stabilise in the second half of this year with a wildcard that there are no more further Covid-19 outbreaks,” Manokaran said.
“The government has already assured that there will be no more lockdowns but there are still uncertainties, we can’t be too sure for now. There will still be short-term uncertainties but in the longer term, this will be stabilising,” he added.
Meanwhile, MIER said consumers are showing signs of apprehension over their economic well-being recently as the support for consumer spending is not yet firmly in place.
This is due to the ongoing threats of Covid-19 with the emergence of new strains that continues to pose challenges to the economy, it said.
“While higher unemployment signals a weakening in the labour market, the recent massive food do not bode well for both consumers and businesses,” MIER said.
MIER’s consumer sentiment index (CSI) fell to 97.2 in the fourth quarter of 2021 and the index fell 4.5 points from the previous quarter.
“This indicates a lack of confidence among consumers recently. The CSI was dragged down mainly by financial expectations.
“While households were a tad more positive about their present financial conditions than they were in the last two quarters, they conveyed increased uncertainty about their finances, going forward,” the institute said.
“Notwithstanding this, a stable employment outlook is likely fuelling shopping plans in the months ahead,” it added.
MIER noted that there were ongoing concerns of potentially higher cost of living, inflation and economic uncertainties which are clouding consumer sentiment.
“With 88% of the respondents envisaging an increase in prices soon, this is the largest proportion of responses received in seven years,” it said.
Moving forward, Afzanizam said that following the release of these statistics, there could be a good chance GDP growth for the fourth quarter to come in at a positive rate after having declined 4.5% in the third quarter.
“Despite that, the downside risks to growth are still visible and it could sway the growth trajectory,” he said.