In accordance with the BCI compiled by MIER, the index plunged by 13 factors to achieve 82.4 factors on persistent world uncertainties
by RUPINDER SINGH
THE second quarter of 2023 (2Q23) witnessed a decline in enterprise confidence, reversing the upward development noticed within the earlier quarter. In accordance with the Enterprise Situations Index (BCI) compiled by the Malaysian Institute of Financial Analysis (MIER), the index plunged by 13 factors to achieve 82.4 factors.
This marks the bottom degree since 2Q20.
On a year-on-year (YoY) foundation, the BCI noticed a notable drop of 13.8 factors from 96.2 factors within the corresponding interval of the earlier 12 months.
A prevailing sense of pessimism appears to pervade the enterprise panorama as mirrored within the BCI Anticipated Index for 2Q23, which decreased to 94.3 factors from the previous quarter’s 115.8 factors.
The survey findings strongly recommend that the declining BCI is accompanied by unfavourable indicators by way of gross sales and employment traits throughout this era.
This collective knowledge might sign the companies’ apprehensions concerning the persistent world uncertainties, implying that these uncertainties may proceed to adversely have an effect on enterprise operations within the quick time period.
Gross sales Downturn Indicators Considerations
Among the many regarding facets revealed by the survey is the decline in firms’ gross sales outlook.
The gross sales index plummeted by 7.3 factors to 40.5 factors in 2Q23. This downturn is much more pronounced when examined on a YoY foundation, with a lower of 9.5 factors from 2Q22.
Diving deeper, it turns into evident that firms’ outlook on gross sales in 2Q23 is notably pessimistic.
A mere 19% of the respondents reported beneficial gross sales for the quarter, representing an 11-point drop from the previous quarter.
In distinction, 38% and 43% of respondents famous the declining and unchanged gross sales performances respectively.
Industries resembling paper and paper merchandise, plastics and furnishings have been significantly affected by declining gross sales, whereas leather-based merchandise showcased an upturn with improved gross sales in 2Q23.
Challenges in Home, Exterior Orders
The survey outcomes unveiled a big decline in home orders, with the sub-index falling by 9.8 factors quarter-on-quarter (QoQ) to achieve 32.3 factors.
On a YoY foundation, this represents a lower of 14.8 factors from the identical interval within the earlier 12 months.
Alarmingly, the variety of companies reporting declining gross sales rose to 52%, indicating a shift from the 42% recorded in 1Q23.
Sure sectors bore the brunt of this decline, together with meals processing, printing and replica of recorded media, paper and paper merchandise, digital parts and boards, in addition to motor autos and transport tools.
Conversely, solely 16% of the respondents reported improved orders throughout the identical quarter.
Sectors like leather-based and associated merchandise, together with electrical tools, displayed a constructive development with a rise in orders.
Exterior demand, affected by world uncertainties and rising inflation, additionally skilled a downturn in 2Q23. Export orders noticed a decline of seven.9 factors to achieve 35 factors through the quarter.
In comparison with the corresponding quarter within the earlier 12 months, this marked a five-point drop.
The variety of companies reporting a decline in export orders elevated to 43% from the 33% recorded within the earlier quarter.
Manufacturing and Stock Struggles
Industrial manufacturing confronted the same setback, with the commercial manufacturing index dropping by 8.6 factors QoQ to face at 39.2 factors.
This additionally represents a 15-point lower in comparison with the identical interval within the earlier 12 months.
Whereas 19% of respondents reported a rise in manufacturing volumes, this means a 16-point lower from the earlier quarter.
Notably, companies within the leather-based and associated merchandise sector have been chargeable for the rise in manufacturing volumes.
Conversely, 41% of companies reported declining industrial manufacturing quantity in 2Q23, in comparison with the 39% reported within the previous quarter.
These companies have been predominantly from the textiles, furnishings and sporting attire sectors.
As gross sales, home, and exterior orders declined, extra companies reported a rise in stock ranges.
Solely 22% of respondents reported decreased stock ranges, in distinction to the 27% reported within the previous quarter. However, 39% of companies reported a rise in stock ranges, up considerably from the 14% recorded in 1Q23.
The remaining 39% famous that their stock ranges remained unchanged.
Regular Capital Funding
Curiously, regardless of the prevailing uncertainties, capital investments remained steady in 2Q23, sustaining a rating of fifty factors.
The BCI sub-index particularly monitoring investments in new plant and tools additionally held regular at 50 factors.
Of the surveyed companies, 30% elevated their capital investments throughout this era, significantly within the textiles, leather-based merchandise, and furnishings sectors.
Equally, 30% of companies reported a decline in capital investments.
Capability Utilisation, Employment Tendencies
Regardless of the largely unfavourable indicators, the common capability utilisation confirmed a slight enchancment, rising from 75.5% within the earlier quarter to 75.6% in 2Q23.
Inside this context, 25% of producers reported working inside the 81%-100% capability utilisation vary, a notable drop from the 36% recorded within the earlier quarter.
Most companies (36%) operated inside the 61%-80% vary, down from 41% within the previous quarter.
In the meantime, 31% operated inside the 41%-60% vary, and eight% operated inside the 0-40% vary.
Nevertheless, the employment scenario displayed indicators of decline in 2Q23 in comparison with the earlier quarter.
A complete of 24% of surveyed firms reported a rise within the variety of workers, marking a six-point lower from 1Q23.
Industries that significantly reported constructive employment traits have been leather-based merchandise and the manufacture of medical, precision and optical devices.
In distinction, 19% of respondents reported a lower in employment, up two factors from the earlier quarter.
The plastics and paper product sectors have been significantly affected by way of unfavourable employment traits.
Wage Prices, Gross sales Costs
A majority of the surveyed companies (65%) reported a rise in wage prices in 2Q23, indicating a lower of 13 factors from the 78% reported within the previous quarter.
However, solely 5% reported a lower in wage prices.
Looking forward to 3Q23, a big majority of respondents (65%) anticipated a rise in wage prices, whereas 30% anticipated them to stay unchanged.
Gross sales costs witnessed a decline in 2Q23. A complete of 42% of companies reported unchanged gross sales costs, marking a 20-point lower from the 62% recorded within the earlier quarter.
In distinction, 24% reported a rise in gross sales costs, significantly within the leather-based merchandise, equipment and tools, digital tools, and manufacture of medical, precision and optical instrument sectors.
Concurrently, 33% reported a lower in gross sales costs, significantly within the textiles, printing and replica of recorded media, and electrical tools sectors.
The diminishing tones of the BCI for 2Q23 paint a vivid portrait of a personal sector grappling with apprehensions concerning imminent enterprise circumstances.
This tenure resonates inside the unfavourable indicators manifesting throughout gross sales, employment, and stock ranges, amongst different very important dimensions.
“Because the spectre of world uncertainties looms massive, augmented by inflationary pressures and provide chain disruptions, Malaysia finds itself standing on the crossroads of vulnerability,” MIER concluded.
- This text first appeared in The Malaysian Reserve weekly print version