Slight downturn in business optimism in Q amid lukewarm economic growth - D&B Malaysia Business Optimism Index

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1 FOR IMMEDIATE RELEASE Contact: Eugene Z., Marcom & Product Development Slight downturn in business optimism in Q amid lukewarm economic growth - D&B Malaysia Business Optimism Index Kuala Lumpur, 12 January 2015 Following a slight rebound in business optimism in Q4 2014, business optimism has taken a slight downturn for Q According to Dun & Bradstreet (D&B) Malaysia s Business Optimism Index (BOI) study, 5 of six business indicators have remained in the expansionary region with four indicators moderating downwards. The latest BOI study revealed that business confidence in Malaysia has dropped marginally from percentage points to an all-time low of percentage points on a quartera-quarter (q-o-q) basis. Compared to a year ago, however, BOI has slipped moderately from percentage points in Q to percentage points in Q The six business indicators under the quarterly BOI study include volume of sales, net profits, selling price, inventory level, employees and new orders. Figure 1. Overall Business Optimism Index (Q Q1 2015) According to D&B Malaysia, firms are most optimistic about volume of sales and selling prices a percentage points and percentage points respectively. On a q-o-q basis, volume of sales is expected to decelerate from percentage points to percentage points while employment is likely to decelerate from percentage points to percentage points. Compared to the previous quarter, optimism levels in net profits are expected to decline from percentage points in Q to percentage points in Q Both selling prices and inventory levels are likely to increase in Q from +1.5 percentage points and

2 +3.0 percentage points respectively on a q-o-q basis. Meanwhile, manufacturers are expecting new orders to fall into contractionary levels as net optimism registered percentage points. On a year-on-year (y-o-y) basis, 5 of six business indicators have moderated downwards. According to D&B Malaysia, volume of sales, net profits, employment size, new orders and inventory levels have moderated downwards from percentage points, percentage points, percentage points, +8.0 percentage points and percentage points respectively. Selling prices is the only business indicator experiencing an increase from percentage points. Both wholesale and services sectors have emerged as the most optimistic sectors with all five business indicators in the expansionary region. In tandem with robust growth within the wholesale sector, the outlook remains positive with 4 of five business indicators moving upwards. According to D&B Malaysia, volume of sales and selling prices are expected to increase significantly from percentage points in Q to percentage points in Q and percentage points in Q to percentage points in Q respectively. Meanwhile, sentiments within the services sector looks set to be upbeat with strong growth in data communication services, real estate medical and business services. After ranking as the top two most optimistic sectors in the previous quarter, the construction sector descends slightly as the third most optimistic sector this quarter. This is primarily attributed to a slight moderation in nonresidential building and special trade projects. However, overall growth within the construction sector is expected to remain firm with volume of sales, net profits and selling prices all climbing upwards to percentage points, percentage points and percentage points respectively. Meanwhile, the outlook for the manufacturing sector remains weak with only 2 of six business indicators in the expansionary region. This quarter, new orders are expected to worsen as optimism level falls from 0.0 percentage points to percentage points. Selling prices have also remained in the contractionary region registering percentage points. Due to slower growth within domestic-oriented industries and drop in sales of commodities, overall sentiments within the manufacturing sector have dampened significantly in Q The agricultural sector is also less upbeat about the new quarter with only two business indicators in the expansionary region. According to D&B Malaysia, volume of sales are expected to fall into the contractionary zone, declining from percentage points in Q to percentage points in Q Net profits have similarly taken a dive from percentage points in Q to percentage points in Q The poorer showing comes amid slower growth in industrial crops such as palm oil and rubber. The export-led recovery and sustained domestic demand has certainly kept business optimism levels within the positive region. However, the overall outlook still remains cautious if one were to compare the statistics for Q4 BOI with the first half of the year when business sentiments were much more upbeat then. A tighter fiscal monetary policy may continue to weigh on domestic demand growth in the upcoming quarters as higher interest rates would translate into higher business costs for firms. commented Mr. Tan Boon Kim, D&B Malaysia s Managing Director. At the same time, local firms are not spared from the ongoing global uncertainties. Firms may need to review their corporate strategies to ensure that they remain relevant in the long-term. added Mr. Tan. D&B 2/7

3 Overview of Business Indicators Net Profits Net profits are expected to moderate from percentage points in Q to percentage points in Q The construction and finance sectors are most upbeat about net profits with a net optimism of percentage points and percentage points respectively. This is followed by the mining sector at percentage points. The transportation sector is the only sector anticipating reduced net profits at optimism level of percentage points. The remaining sectors have expressed moderate optimism in net profits Manufacturing ( percentage points), Services ( percentage points), Agriculture ( percentage points) and Wholesale (+7.89 percentage points). Figure 2. Net Profits Optimism Score, Q Q Volume of Sales As with net profits, volume of sales are expected to moderate from percentage points to percentage points. Both mining and construction sectors are most optimistic at net optimism percentage points and percentage points respectively. This is followed by wholesale at percentage points. The finance sector is anticipating an unchanged status in volume of sales while the agricultural sector is expecting a contraction at percentage points. D&B 3/7

4 Figure 3. Volume of Sales Optimism Score, Q Q Selling Prices Selling prices have increased to a net optimism index of percentage points. The finance sector is most optimistic at net optimism percentage points, followed by the transportation sector at net optimism percentage points, wholesale sector at net optimism percentage points and services at percentage points. The agriculture sector is expecting an unchange in status of selling prices while the manufacturers are the only sector which is pessimistic about selling prices. Selling Price Figure 4. Selling Price Optimism Score, Q Q D&B 4/7

5 New Orders New Orders are expected to fall into the contractionary region from 0.0 percentage points to percentage points in Q The manufacturing sector is the only sector which furnishes information about their expectations on new orders. Figure 5. New Orders Optimism Score, Q Q Employment Employment levels are expected to moderate from net optimism of percentage points to percentage points. As with Q4 2014, both wholesale and services sectors are most optimistic about employment as hiring is likely to increase to percentage points and percentage points. The transportation, finance and construction sectors are also likely to step up their employment to percentage points, percentage points and percentage points respectively. Both agricultural and manufacturing sectors are anticipating an unchange in employment. The mining sector is the only industry expecting a decrease in hiring for Q Figure 6. Employment Optimism Score, Q Q D&B 5/7

6 Inventory Levels Inventory levels are expected to increase to +3.5 percentage points. Both agriculture and mining sectors are anticipating an increase in inventory levels at percentage points each. Both construction and manufacturing sectors are anticipating an unchange in inventory levels. The remaining sectors have anticipated a moderate optimism Finance (+6.25 percentage points), Transportation (+3.70 percentage points), Services (+3.39 percentage points) and Wholesale (+2.63 percentage points). Figure 7. Inventory Optimism Score, Q Q Commentary D&B Business Optimism Index (BOI) was first released in Singapore in July 2009.This is the 8 th D&B Business Optimism Index (BOI) being released in Malaysia. The D&B Business Optimism Index (BOI) is a measure of business confidence in the economy. Released quarterly, it is based on a business sentiment survey that is designed to capture business expectations and is one of the most effective ways to track how the business community perceives the business environment, and where they think it is moving. This is commonly used, worldwide, to assist in analyzing major trends and issues concerning the business community through tracking business parameters including net profits, selling prices, new orders, inventory levels, and employee count. About the Survey D&B Malaysia conducts latest Business Expectations Surveys every quarter. Each quarter, 200 business owners and senior executives representing major industry sectors across Malaysia are asked if they expect increases, decreases or no changes in their upcoming quarterly Sales, Profits, Employment, New Orders, Inventories and Selling Prices. Note: The index figures used in the survey represent the net percentage of survey respondents expecting higher sales, profits, etc., compared with the same quarter of the previous year. The indices are calculated by subtracting the percentage of respondents expecting decreases from the percentage expecting increases. D&B 6/7

7 About D&B (D&B) D&B is the world's leading source of commercial information and insight on businesses, enabling companies to Decide with Confidence for 173 years. D&B s global commercial database contains more than 235 million business records. The database is enahnced by D&B s proprietary DUNSRight Quality Process, which provides our customers with quality business information. This quality information is the foundation of our global solutions that customers rely on to make critical business decisions. D&B provides two solution sets that meet a diverse set of customer needs globally. Customers use D&B Risk Management Solutions to mitigate credit and supplier risk, increase cash flow and drive increased profitability, and D&B Sales & Marketing Solutions to provide data management capabilities that provide effective and cost efficient marketing solutions and to convert prospects into clients by enabling business professionals to research companies, executives and industries. For more information, please visit Contact Information Eugene Z. Marcom & Product Development DID: HP: Eugene.tan@dnb.com.sg It is clear that the overall outlook for Malaysian businesses remains optimistic despite the government s fiscal consolidation in stabilizing rising debt levels and reducing the nation s budget deficit. The austerity move has not dampened business sentiments as most industries are anticipating marginal expansions in the coming months. said Mr. Tan Boon Kim, D&B Malaysia s Managing Director. D&B 7/7