PP 7767/09/2010(025354)

Malaysia
Economic Highlights
•
MARKET DATELINE

8 July 2010

Manufacturing Sales Held Stable In May

◆ Manufacturing sales held stable at 19.9% yoy in May, the same rate of increase as in April but off a high of
+26.4% in March. This was in contrast with a slowdown in the exports of manufactured goods, suggesting stronger
manufacturing sales to cater for domestic demand might have provided some cushion.

◆ While manufacturing sales stabilised, manufacturers have turned slightly cautious in recruitment during the
month, on the back of rising economic uncertainties following a deepening in sovereign debt problem in Europe.
Consequently, the number of workers recruited fell to 6,074 in May, from a total of 10,811 workers employed in April.

◆ Going forward, the global economy is showing signs of expanding at a more moderate pace in 2H 2010,
as worldwide stimulus spending dissipates and austerity measures in some European countries begin to bite. This
will likely be compounded by the policy normalisation and tightening in some countries. Despite the weakness, we
do not expect the global economy to fall into a double dip. As a whole, we expect the country’s exports and
manufacturing sales to slow down in 2H 2010, after a strong pick-up in the 1H.

Manufacturing sales held stable at 19.9% yoy

Table 1
in May, the same rate of increase as in April but off Manufacturing Sales
a high of +26.4% in March (see Table 1). This was
Total Sales/ Salaries/
in contrast with a slowdown in the exports of
sales worker worker
manufactured goods, which eased to an estimate of
16.3% yoy in May, from +24.3% in April, suggesting RMbn % yoy RM'000 % yoy RM % yoy

stronger manufacturing sales to cater for domestic

2008 579.3 10.7 572.5 19.9 24,296.8 8.9
demand might have provided some cushion. Stripping 2009 469.6 -19.0 497.1 -13.2 24,901.8 2.5
out seasonal factors and measured on a 3-month
moving average basis, manufacturing sales inched up 2010 Mar 46.1 26.4 48.1 25.7 2,288.4 18.4
Apr 43.0 19.9 44.3 16.6 2,237.9 14.8
to 22.0% yoy in May, after softening to 21.1% in April
May 44.1 19.9 45.2 14.3 2,219.3 10.5
(see Table 2), pointing to a resilient in manufacturing
sales. 2009 (Jan-May) 177.2 -25.9 185.3 -19.9 9,770.4 -0.9
2010 (Jan-May) 216.7 22.3 225.4 21.6 11,278.8 1 5 . 4
Mom, manufacturing sales grew by 2.6% in May,
a rebound from -6.7% in April. This was in tandem with a pick-up in manufacturing production, which rebounded to
increase by 3.8% mom in May, from -3.6% in April. However, this was in contrast with a drop in the exports of
manufactured goods, which fell by an estimate of 2.8% mom in May, compared with -9.9% in April, suggesting that
stronger sales to cater for domestic demand might have boosted manufacturing sales during the month.

While manufacturing sales stabilised, manufacturers have turned slightly cautious in recruitment during the
month, on the back of rising economic uncertainties following a deepening in sovereign debt problem in Europe.
Consequently, the number of workers recruited fell to 6,074 in May, from a total of 10,811 workers employed in April.
Nevertheless, manufacturers have been recruiting workers for a year, in tandem with a recovery in the manufacturing

Peck Boon Soon

(603) 9280 2163
Please read important disclosures at the end of this report.
bspeck@rhb.com.my

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 8 July 2010

sector. As a result, total employment in the manufacturing Table 2

sector strengthened to 4.8% yoy in May, the third straight Manufacturing Sales
month of growth and from +2.8% in April. Meanwhile, the % mom
manufacturing sector’s productivity (measured by sales value
Total Sales/ Wages/
of manufactured products per employee) weakened to 14.3%
Sales employee employee
yoy in May, from +16.6% in April. Similarly, wages per
‘10 Mar 14.8 14.0 0.8
employee eased to 10.5% yoy in May, from +14.8% in
Apr -6.7 -7.8 -2.2
April.
May 2.6 1.9 -0.8

Going forward, the global economy is showing signs of (3-month moving average)

slowing down in 2H 2010, as worldwide stimulus spending % mom % yoy

dissipates and austerity measures in some European Total sales/ wages/ Total sales/ wages/
countries to address fiscal deficit and debt problems begin Sales emp. emp. Sales emp. emp.

to bite. This will likely be compounded by the policy ‘10 Mar 2.3 1.7 0.3 Mar 24.0 26.0 17.3
normalisation and tightening measures introduced in some Apr -0.3 -1.0 -0.4 Apr 21.1 20.4 16.6
countries, particularly in Asia, that will likely slow down May 3.1 2.2 -0.8 May 22.0 18.8 14.5

economic activities in these countries. Already, global

manufacturing and services activities moderated in June, the second consecutive month of easing, suggesting that
global economic activities have turned softer. In the same vein, the OECD composite leading indicator has been
trending lower m-o-m for the last few months before stabilising somewhat lately. Indeed, the leading indicator’s 12-month
rate of change moderated to 9.7% in April, the first easing in eight months and from +10.2% in March and +10.1% in
February, indicating that OECD countries’ economies are likely to expand at a slower pace in the months ahead. Despite
the weakness, we do not expect the global economy to fall into a double dip even though there is a risk
of a sharper-than-expected slowdown, given that policy normalisation and tightening remain gradual. Also, we
expect the sovereign debt problems in Europe to be manageable despite the lingering concerns, following the announcement
of an emergency stabilisation loan of €750bn and the €110bn rescue package for Greece. As a whole, in tandem with
a more moderate growth in the global economy, we expect the country’s exports and manufacturing sales to slow
down in 2H 2010, after picking up strongly in the 1H.

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