SLOWER DECLINE IN LI SIGNALS IMPROVEMENT IN GROWTH MOMENTUM -- MIDF

KUALA LUMPUR, Oct 25 —The slower decline in Malaysia's Leading Index (LI), which shrank by 2.3 per cent year-on-year (y-o-y) in August 2021 compared four per cent in July 2021, signals an improvement in the country’s growth momentum in the near term.

MIDF Amanah Investment Bank Bhd, in a research note, said the downward drag in the LI reflected the reduction in the number of housing units approved during the month under review.

The LI rebounded and increased by 1.1 per cent month-on-month (m-o-m) in August after a contraction of 0.6 per cent m-o-m in July 2021, the first monthly expansion after four straight months of decline, it said.

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“The monthly rise was underpinned by increases in expected manufacturing sales value, Bursa Malaysia Index, real imports of other basic precious and other non-ferrous metals, and real imports of semiconductors,” it said.

Meanwhile, MIDF Amanah said the improvement in the current economic conditions was also reflected by the slower contraction of 1.1 per cent y-o-y in the Coincident Index (CI) compared with July 2021’s -5.2 per cent y-o-y.

This was attributable to the recovery in domestic manufacturing and consumption activities amid the easing of restrictions and transition of states to the next phases of the National Recovery Plan, it said.

“Looking at the trend in both LI and CI, we foresee Malaysia’s economy is back on the recovery track and will continue growing in the upcoming months amid further relaxation of the lockdown restrictions.

“However, some downsides risks still remain which could affect the growth outlook, notably the possible resurgence of COVID-19 in view of lifting the interstate travel ban and reopening of many social activities,” it said.

In addition, growth could be affected by the ongoing supply chain bottlenecks and the slowdown in China, which could affect exports and trade-oriented industries, MIDF Amanah said.

-- BERNAMA