'Robust Q2 activity bodes well for H1'

August 12, 2017 | By | Reply More

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KUALA LUMPUR: ECONOMIC activities in the second quarter of the year have ramped up at a faster pace than market expectations, promising a brighter economic outlook for the first half of the year.

Investment banks and research houses such as Hong Leong Investment Bank (HLIB) expect the second quarter to have grown 5.8 per cent, from the robust 5.6 per cent in the first quarter.

HLIB has also raised its full-year growth forecast to 5.4 per cent.

Stronger industrial output due to higher manufacturing activities and services sector growth of seven per cent between April and June has also raised the growth momentum going into the second half of the year.

Affin Hwang Capital Research said healthy trade activities and strong manufacturing output would have ensured the economy to grow at a steady 5.2 per cent pace during the second quarter.

To Singapore-based Nomura Research, the resilience of Industrial Production Index (IPI) growth contrasts with the sharp slowdown in June export growth and other activity data like crude palm oil production.

“The upside surprise came from mining IPI growth and this may not be sustained in the coming months,” said the firm.

Mining output turned around from a 2.3 per cent contraction to 2.4 per cent growth in June, due to higher production of crude oil and natural gas.

MIDF Research expects the encouraging trend of the IPI — which tracks the manufacturing, mining and electricity sub-sectors — to continue for the upcoming months.

“Due to strong export performance for the first half of this year and optimistic business confidence, we believe the upbeat momentum will remain and thus causing positive spillover effects to Malaysia’s industrial production this year,” it said.

Based on the solid uptrend in trade activities and steady domestic consumption, MIDF Research expects industrial production growth to hit 5.3 per cent this year.

HLIB and Affin Hwang, nevertheless, prefer to be a bit cautious about the overall growth in the second half.

“While we expect near-term growth impetus to remain resilient, our forecast trajectory for a more moderate second half is retained as the base effect (commodity sector) and exuberance (exports and capital market activity) wear off,” said HLIB.

Affin Hwang said the more moderate growth envisaged for the second half was mainly due to the higher base effect in the corresponding period of last year.

“However, we expect growth in domestic demand, especially private consumption, to remain supportive of economic growth, backed by sustained income growth, favourable labour market conditions as well as higher number of tourist arrivals to Malaysia in the second half.”

According to Tourism Malaysia, tourist receipts are expected to rise to RM118 billion this year compared with RM82.1 billion last year, with the numbers to increase to 31.8 million, from 26.76 million last year, due to the 2017 SEA and Para Asean Games this month and in September.

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