Consumer confidence in Malaysia increases

Sources: By YVONNE TAN (The Star Online) 15th July 2009

PETALING JAYA: Consumer confidence in Malaysia improved in the second quarter of the year compared with the first quarter as individuals began to feel “less negative” about the current state of the economy and more optimistic about its future, according to a recent study.

The local Consumer Confidence Index was up from 83 to 94 alongside increases in the indexes of other Asian countries, namely Singapore, China, Thailand and Indonesia, according to independent market research agency InsightAsia Research group’s latest survey.

“Consumers are substantially more positive in the second quarter than they were in the first,” it said in its latest report on Asian Consumer Confidence.

Even though economic growth was expected to remain negative this year, emergency economic policy measures and recovering equity markets had lent support to confidence, it noted.

The survey covered 2,300 people from urban areas that were asked their assessment of the current economic situation and expectations for the next 12 months. The level 100 is the neutral point in the index, where an index higher than 100 indicates a high confidence level (optimistic) and an index below 100 indicated a low level of confidence (pessimistic).

Of the five countries, Singapore registered the strongest growth, adding 26 points to 88 while Indonesia and Malaysia increased more than 10 points each and were now just below the neutral point, at 97 and 94 respectively, the survey revealed.

Singapore yesterday said its economy rebounded strongly by 20.4% quarter-on-quarter in the second quarter versus the market’s expectation of 13.4%, helped by recovery in its construction and manufacturing sectors.

The Singapore government has raised its 2009 forecast to between -4% and -6% year-on-year, up from a previous forecast of -6% and -9%.

In Malaysia, improvements in the local economy were expected in the second half and should extend into 2010 as the effects of the implementation of the various stimulus packages were felt.

Professor of economics and head of department at the London School of Economics Danny Quah does not think that the renewed confidence is unfounded.

“The severe fall-off in the first place was, in my view, an unwarranted over-reaction in any case,” he told StarBiz via e-mail yesterday.

Quah said the 1997 Asian financial crisis had previously already “cleaned out” a lot of financial weaknesses in the region and while exports to the rest of the world remained important for the region generally, the fundamentals on the supply side had been strong and domestic demand had continued to be supported by both high productivity and healthy balance sheets.

“However, caution and vigilance on the part of policy-makers will always be needed,” he added.

Asian economies needed to be more “profoundly aware” that the world’s centre of gravity had shifted eastwards sharply, and that whatever anaemic growth the West might offer in the next few months, strong performance from China would provide significant growth opportunity for the rest of Asia, he said.