The Malaysian Institute of Economic Research’s (MIER) business conditions index (BCI) fell by 4.4 percentage points to 119.6 in the 2Q, after rising by 5.3 percentage points in the 1Q (see Chart 1). This was the first decline after picking up for the last five consecutive quarters, suggesting that businesses have turned cautious, in view of rising economic uncertainties due to the sovereign debt problem in Europe and policy normalisation as well as tightening undertaken by countries in Asia. Already, exports slowed down for the second consecutive month in May, while industrial production weakened in April before bouncing back in May. Also, manufacturers have turned cautious in recruiting workers during the month. As a whole, the drop in BCI index suggests that private investment will likely ease in 2H 2010, after showing signs of improvement in the 1H of the year. We expect private investment to moderate to 6.4% yoy in 2H 2010, from an estimate of +7.3% in the 1H. For the full-year, private investment, however, is projected to bounce back to increase by 6.9% in 2010, from -17.2% in 2009.
Economic Highlights - Business Conditions And Consumer Sentiment - 16/7/2010
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