-  Statistical releases in February suggest that the Malaysian economy remains on a steady growth trajectory owing in part to the healthy labour market condition.

-  The Coincident Index (CI) showed improvement as it advanced at a healthier pace of 3.5% YoY (or +0.5% MoM) to 120.1 points in February 2014. This compares with January’s reading of 119.5 points (or +2.3% YoY).

-  When compared to January, the increase of CI was attributed to Capacity Utilisation in Manufacturing Sector (0.3%), Volume Index of Retail Trade (0.3%) and Industrial Production Index (0.2%).

-  However, the economy will likely succumb to downward pressure on the back of softer domestic demand in 1H14.

-  Domestic growth slowed in 1Q14 amid ongoing challenges including the anticipation of further subsidy reforms and weaker domestic sentiments.

-  The Leading Index (LI), which monitors economic performance in advance, had moderated to +1.0% YoY (or -0.3% MoM) to 116.0 points in February 2014. In January, the LI registered +2.4% YoY to 116.4 points.

-  Components that contributed to the MoM decline of LI in February include Real Imports of Other Basic Precious & Other Non-ferrous Metal (-0.4% MoM), Expected Sales Value in Manufacturing Sector (-0.2%), and Real Imports of Semi Conductors (-0.1%).

-  Both Diffusion Indexes for LI and CI remained above 50.0%, which suggest that the Malaysian economy will continue to expand at a moderate pace in the coming months.

-  Elsewhere, we note that Malaysia’s labour market conditions remained healthy and has been registering full rate of employment since March 2009. The unemployment rate fell by 0.1ppt MoM to 3.2% in February 2014.

-  Note that the total number of those unemployed had declined by 11,300 persons MoM to 446,400 persons. Total employed persons had also reduced by 89,000 persons to 13.441mil.

-  The labour force participation rate fell by 0.4ppt MoM to 67.4% as the number of labour force reduced. Total labour force fell by 100,300 persons to 13.887mil in February. 

Source: AmeSecurities