Preview

The Department of Statistics Malaysia (DOSM) has nearly finished announcing its quarterly macroeconomic indicators last week, providing us with a glimpse into the potential economic landscape for the first quarter of this year. Here are the highlights:

• The Volume Index of Services continued to expand at a rate of 4.5% YoY to 150.4 points in the first quarter of 2024 (4Q23: 4.1% YoY). On a quarterly basis, the index of services exhibited a growth of 1.3% QoQ (4Q23: 0.5% QoQ).

• Apart from the low base effect (the index experienced a robust increase of 8.8% YoY in 1Q23), all of the sub-segment registered slower increase during the period. Namely, the Wholesale & Retail Trade, Food & Beverages & Accommodation rose moderately by 3.9% YoY, vs 4.2% YoY growth previously. This is followed by Information & Communication and Transportation & Storage (1Q24: 6.0% YoY; 4Q23: 6.6% YoY) and Others Services (1Q24: 6.8% YoY; 4Q23: 7.0% YoY). Meanwhile, Finance, Real Estate and Professional segment accelerated by 3.7% during the quarter, as compared with 1.0% YoY increase previously.

• Building upon the momentum observed in the first quarter, we anticipate that the growth of the services sector in the first quarter of 2024 GDP is poised to align closely with DOSM's advance estimate of 4.4% YoY.

• Figure 3 provides a concise summary of other pertinent quarterly statistics for the first quarter of 2024. The real GDP (supply side) still exhibits resilience driven by expansions in key sectors such as the manufacturing (23.2% of GDP in 4Q23) and mining (6.4% of GDP). However, a slight drag may arise in the first quarter growth trajectory, attributed to potential weaknesses in the agriculture sector, constituting 6.3% of the GDP.

• The majority of economic data released last week by the DOSM suggested that the real GDP for the first quarter of 2024 may closely align with DOSM's advance estimate (1Q24E: 3.9%), falling notably below our optimistic forecast.

• As the first quarter's performance may fall short of our initial estimation of 4.2%, we may have to make the necessary adjustments to our full year GDP forecast. While we initially set our sights on a 4.7% GDP growth in 2024, we acknowledge the need for a downward adjustment – likely to around 4.5% (in line with the Government's forecast of 4.0-5.0%). We will provide a comprehensive update once the DOSM releases the official real GDP data on 17th May.

Source: TA Research - 13 May 2024