Modest domestic growth in 1Q16 with further deterioration in loans and M3

KUCHING: Recent economic indicators for Malaysia provided mixed signals during the start of 2016 with the economy probably grew at a moderate pace in 1Q16.

AmResearch Sdn Bhd (AmResearch) noted that both the leading index ( LI) and coincident index ( CI) posted a lower annual change in December 2015 as compared to the previous month. The LI fell further by 1.2 per cent on year in December 2015, from 0.7 per cent in November 2015.

Meanwhile, the annual change of CI grew at a softer pace of 1.3 per cent, against 1.6 per cent in November 2015.

“Notably, the Diffusion Index for CI declined to 50 per cent, which implies that recent indicators have provided mixed signals of current economic condition,” said the research house.

That said, the Diffusion Index for LI remained at 57.1 per cent, suggesting that the economy will continue to expand albeit at a moderate pace in the near term.

As for the lagging index, growth rate had moderated to 3.4 per cent in December 2015 also, the index fell by 1.1 per cent on month in December 2015, vs. 0.9 per cent in November 2015 ? owing to the decline in labour cost for manufacturing, lower approval rates of investment projects, contraction in exports of natural gas and crude oil.

AmResearch noted that full employment rate persisted in December 2015 as the unemployment rate stood at 3.3 per cent. Total labour force participation rate stood at 67.8 per cent during the month. Mainly, total number of unemployed grew by 5.5 per cent on month to 478,100 while total labour force advanced slightly by 0.2 per cent on month to 14.4 million.

Nevertheless, gross impaired loans climbed further to RM23.3 billion in January 2016.

Producer prices remained lacklustre in January 2016, although consumer prices increased on the back of higher transport cost. Producer price index (PPI) for local production had contracted by 4.4 per cent in January 2016.

The highest drop was recorded by Mining index, followed by Electricity & gas and Manufacturing. Meanwhile, the index for Water supply and Agriculture, forestry & fishing showed an increase of 5.2 per cent and 0.6 per cent respectively it stated.

Growth in the domestic economy slowed further in January 2016. Loans growth for the banking system softened to 7.7 per cent January 2016.

Loans growth continued to trend lower after posting a robust 10.2 per cent growth in August 2015.

Similarly, broad money supply (M3) moderated to 2.2 per cent in January 2016 vs. 2.7 per cent in December 2015.