MIER: Local business sentiment improved in Q3 as sales, demand rose

A foreign worker works at a plastic containers factory in Klang July 8, 2021. — Reuters pic
A foreign worker works at a plastic containers factory in Klang July 8, 2021. — Reuters pic

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KUALA LUMPUR, Oct 22 — Business sentiment saw slight improvement in the third quarter as sales and demand inched upward, likely buoyed by the lifting of movement curbs that weighed on spending appetite in the previous quarter, a survey found.

The Malaysia Institute of Economic Research said the findings of its third-quarter Business Condition Survey signalled a positive outlook that could carry on into the fourth quarter amid anticipation that next year would see a full recovery.

The MIER’s BCI index rose slightly to 97 points from the April-June period. The sub-index measuring sales rose just 3.9 points to settle at a weak 38.8. 

But a fifth of respondents reported good sales in the third quarter, which is expected to bolster confidence going into the last few months of 2021.

The sub-index measuring domestic orders trended marginally higher to reach 33.8 points quarter on quarter, climbing just by 6 points. 

One of four respondents reported higher local demand between July and September while a fifth reported unchanged. The positive data was overshadowed by fallen sales with over half or 56 per cent of respondents saying they registered lower profits.

The external demand sub-index on the other hand continued to record positive sentiment even as Covid-19 restrictions disrupted supply chains, rising 5.9 points to read at 55.9 points quarter-on-quarter.

Nearly half of respondents or 41 per cent said exports rose compared to just 29 per cent for the April-June period while nearly a third reported stagnant orders. Respondents with lower export sales stayed at 29 per cent from the previous quarter.

Exports are among the rare few sectors that have survived the pandemic unscathed. 

Despite the fluctuation in sales, demand has been relatively stable. Manufacturing exports particularly remained strong to become a buffer against the economic shock that followed the coronavirus, helping keep jobs and sustain domestic demand.

Meanwhile, other sub-indexes trended negatively. Capital investment, crucial for job creation and technology sharing, recorded a 5.3 point decline to dip to 54.7 points. 

Just 28 per cent of respondents reported increases q-o-q compared to 34 per cent in the previous quarter, while half said investment remained the same compared to 51 per cent in the second quarter, underscoring a trend that started in 2020.

Respondents who reduced their investment spending also rose to 19 per cent compared to 14 per cent in the previous quarter. 



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