Malaysia’s leading index (LI) rebounded to positive growth in May (+2.2%yoy; Apr-22: -0.5%yoy) after 3 months of contraction. The increase in LI was mainly supported by higher real imports of other basic previous & other non-ferrous metals as businesses bought more intermediate goods in anticipation of a better business and demand outlook.
On month-on-month change, the leading index rebounded and increased by +0.4%mom (Apr-22: -0.5%mom), with a higher number of housing units approved and new company registration pointed to an improved business outlook. The current economic activities also picked up further as the coincident index (CI) rose faster at +6.4%yoy, the highest expansion in 12 months and mainly underpinned by the stronger retail trade activity.
Reading from the improvement in LI, MIDF Research foresees growth momentum in Malaysia’s economy will remain positive going into the second half of 2022. Moreover, domestic spending will continue to grow, boosted by continued recovery in the job market, increased people’s mobility, and increased tourist arrivals following the reopening of international borders.
MIDF maintains its projection that Malaysia’s GDP will grow at +6% this year, better than +3.1% expansion last year. Encouraging growth momentum in the domestic economy will continue going into 2HCY22. Despite rising inflation, the latest data shows domestic spending activity grew faster, benefiting from the reopening of the economy and the international borders.
The recovery in the job market amid robust labour demand also supports improvement in consumer spending. Meanwhile, trade performance shows businesses increased imports of intermediate goods. In line with the improvement in LI, this shows businesses are increasing their activities in anticipation of growing demand. On the external front, MIDF expects sustained growth in foreign demand for E&E and commodities, especially palm oil and petroleum, which will continue to drive Malaysia’s exports in the coming months.
Nevertheless, the research firm opines downside risks to the growth outlook will come mainly from external factors such as sluggish growth in China, the ongoing war in Ukraine, changes in global commodity prices, and volatility in the international financial markets
