Amid the global geopolitical tensions and rising oil prices, Malaysia’s transition into the endemic phase and the re-opening of international borders are shoring up consumer sentiment.

This is reflected by the Malaysian Institute of Economic Research (MIER) Consumer Sentiments Index (CSI), which rose 11.7 points quarter-on-quarter to 108.9 in the first quarter of this year, again breaching the 100-point optimism level it last did two quarters ago.

All components that comprise the latest CSI performed better than in the fourth quarter of last year, with expected employment leading the improvement, followed by current income and financial outlook.

“Consumers’ assessment of current conditions is better now than last quarter. Their near-term expectations of jobs and incomes are equally sanguine.

“While jobs remain a key driving force, incomes are looking up, which are expected to boost domestic demand and lift consumer spending in the future.

“However, consumer shopping plans are looking conservative as consumers are likely adopting a cautious stance for now in light of the prevailing slow economic momentum, both locally and abroad,” the think tank said.

Consumers are keeping their fingers crossed that their incomes would improve further in the next few months. Twenty-six per cent hoped to fare better financially soon, the highest proportion tabulated in four quarters, it noted.

It said an upturn in business activity from the re-opening of the economy and borders for international travel would help generate more employment opportunities and are buoying consumer expectations of better finances by mid-2022.

“Thirty per cent of the respondents opined that more jobs were available in the first quarter of 2022, the highest proportion received to date since the fourth quarter of 2014,” MIER said.

However, it said business sentiments for the first quarter of this year have deteriorated.

The Business Conditions Index (BCI) in the said quarter showed a decline in outlook by 21 points to settle at 101.0, slightly above the 100-point threshold. When compared to the previous quarter, all components of the BCI showed a lower reading.

“Manufacturing firms saw a drop in sales, attributed to domestic and external demand decline. Along with this, production, capital investment and capacity utilisation have all decreased.

“Unfavourable business confidence has been exacerbated partly by [the Ukraine conflict], resulting in increased uncertainty and unsettled commodity markets.

“Furthermore, disruptions in supply chains, volatile energy prices and localised wage pressures contribute to inflationary uncertainty.

“However, inflationary pressures should gradually decline as supply-demand imbalances fade in the coming quarter of 2022,” MIER said.

It said geopolitical uncertainty is moving up the ladder to be the top downside risk, especially in the immediate and near term. Geopolitical tensions between superpowers are emerging fast in the Indo-Pacific region, propelled by the conflict in Ukraine.

On the economic front, the domestic economy is moving from economic recovery last year to an expansion phase and strong growth this year, and slowing down moderately towards a more sustainable growth trajectory in the medium and longer term.

This necessitates efforts to deepen further economic and social development and ultimately enhance the national well-being and welfare of the “rakyat”, or ordinary people.

“In this respect, new advances in technologies will need to be adopted by utilising more high-quality capital-embodied technology and intensifying educational and training opportunities, producing a greater number of the skilled-and-educated workforce, thereby deepening and widening the talent pool in the country.

“The key priority of economic policy actions must be in the medium and long-term structural adjustment and reform programmes, supported by appropriate short-term stabilisation measures and suitable macro-prudential arrangements,” MIER said.

THE STAR (MALAYSIA)/ASIA NEWS NETWORK