Above expectation – Malaysian GDP in 2Q17 edged up to RM287.2b, surging +5.8% y-o-y (vs 1Q17: +5.6% y-o-y). The results were above our house expectation and market consensus. The higher-thanexpected result was aided by sterling performance in the service and manufacturing sectors. The surpassing performance this quarter has led to an uptrend momentum in 1H17 with growth of +5.7% as compared to +4.0% in 1H16. However, after being seasonally adjusted, GDP eased to +1.3% as compared to +1.8% in the preceding quarter.
Mixed performance shown by main sectors – The services sector which contribute 54.2% of GDP managed to record a sturdy growth of +6.3% (v.s 1Q17: +5.8%), buoyed by major growth in Wholesale & Retail Trade and Information & Communication which grew +7.7% (vs 1Q17: +5.8%) and +8.5% (vs 1Q17: +8.2%) respectively. Besides, the Manufacturing sector’s growth widened to +6.0% as compared to 1Q17 with +5.6%. The expansion in this sector was underpinned by higher production of semiconductors and consumer electronic that led to the expansion of E&E product by +9.8%. Meanwhile,
Construction sector posted another impressive growth of +8.3% (vs 1Q17: +6.5%) driven by Civil Engineering that expanded +14.9% due to projects related to transportation and utilities. However, Agriculture sector and Mining and quarrying sector saw slower growth. The Agriculture sector recorded a soft growth of +5.9% (vs 1Q17: +8.3%), resulted from slower momentum in Forestry & Logging with -14.5% (vs 1Q17: -11.5%) due to decline in production of saw logs. Meanwhile, Mining and quarrying sector showed a small growth of +0.2% (v.s 1Q17: +1.6%) due to deterioration in production of crude oil and laid-back in natural gas.
Domestic demand driven by Private Consumption – Private Final Consumption Expenditure, which contributed 53.3% of GDP, recorded an enormous growth of +7.1% (vs 1Q17: +6.6%), which was largely aided by consumption of Food & Non-Alcoholic Beverages, Communication as well as Restaurants & Hotels. However, Public Final Consumption Expenditure tapered to +3.3% (v.s 1Q17: +7.5%) mainly due to lower spending on emoluments as well as supplies and services. Meanwhile, Gross Fixed Capital Formation (Investment) dwindled to +4.1% as compared to +10.0% in the previous quarter. The exhausting momentum was dented by the unfasten growth in Machinery & Equipment with +4.4% (vs 1Q17:+21.8%). In addition, the Public sector posted a decline of -5% this quarter that has led to a dull performance in Gross Fixed Capital Formation.
External demand slightly downward – Exports and imports posted moderate growth as compared to the preceding quarter with +9.6% (vs 1Q17: +9.8%) and +10.7% (vs 1Q17: +12.9%) respectively. The soft growth in exports was impelled by double-digit growth in exports of service while passive momentum in imports was due to slower imports of goods.
Foresee a soft trend in 3Q17 – Looking ahead, we envisage that the country will achieve moderate GDP growth in following quarter as we expect 2H17’s economic expansion will gradually slow down. However, we expect that service and manufacturing under the production side as well as private final consumption expenditure will continue as key contributors to our country’s GDP. Hence, we are revising upward our full year forecast of 2017 to +5.1% from +4.7% amid better-than-expected GDP growth this quarter. However, we foresee external factors still pose a downside risk to the nation’s GDP amid uncertainty on US President Donald Trump’s policies.
Source: JF Apex Securities Research - 21 Aug 2017
Created by kltrader | Aug 28, 2023