Rightway: Malaysia's economy: Fine growth with minimal inflation

Saturday 4 May 2019

Malaysia's economy: Fine growth with minimal inflation

Click to enlarge: http://clips.thestar.com.my.s3.amazonaws.com/clips/business/Business%20Pg6-0305.pdf

The economy continues to chug along just fine even as it recorded the first inflation of the year in March. The consumer price index (CPI) rose 0.2% in March 2019 from the previous year.

The recovery away from a deflation in the previous two months was driven by the transport and the food & non-alcoholic beverages components of the CPI.

MIDF Research said in its report that the country's consumer inflation is likely to stay low following the lower capped prices of RON95 and Diesel at RM2.08 and RM2.18 per litre respectively.

Nevertheless, it said that the demand-push factor remains firm amid stable job market and steady wage growth.

Meanwhile, labour force growth has maintained at 2.1% year-on-year (yoy) in Feb 2019 while employment growth inched down to 2.1% yoy while jobs added in the economy was recorded at 34,000.

It noted that the number of unemployed people officially increased by 1.6% yoy.

But it noted also that growth in both the labour force and employment continued to outpace unemployment growth for the last 24 months since Mar 2017.

"The stable job market reflects healthy development of Malaysia’s economy and provides solid support to domestic demand," the research house said.

Meanwhile, exports dropped 5.3% yoy in Feb 2019, the lowest in more than two years mainly due to a short calendar month on top of the long Chinese New Year (CNY) holidays.

Imports also fell and it declined more than exports at 9.4% yoy.

During the CNY holidays, all Chinese factories were shut down with most of them closed one or two weeks prior to the festive holidays. As the celebration put a halt to mass production, it disrupted the global supply chain resulting in a weak trade performance.

All sectors recorded a negative exports growth: agriculture (-13.7% yoy), manufacturing (-4.3% yoy) and mining (-5.5% yoy).

Despite the poor exports and imports figures, trade surplus maintained at above RM11bil in Feb 2019.

When compared with the previous month, both exports and imports contracted by 22% and 24.8%
respectively.

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