Wednesday, January 29, 2014

Consumer confidence hits 5-year low

MIERMalaysian consumers are holding back purchases as rising inflation puts a strain on household finances, results of a survey of 1,022 households in Peninsular Malaysia by the Malaysian Institute of Economic Research (MIER) today revealed.
MIER’s Consumer Sentiment Index stood at just 82.4 points in the fourth-quarter last year or 4Q13, well below the 100-point demarcation line for the first time since the Global Financial Crisis almost five years ago.
From a peak of 122.9 points in the first-quarter last year or 1Q13, the Consumer Sentiment Index has been steadily falling each quarter to end 2013 on a low note.
consumer sentiments index 08 13 280114Household incomes have been adversely affected by climbing inflation, the survey results found. In December 2013, growth in the consumer price index (CPI) accelerated to 3.2% year-on-year (y-o-y), Bank Negara reported. The average inflation rate for 2013 was 2.1% (y-o-y)
In their quarterly report today, MIER wrote: “Pay gains are not boosting household balance sheets as creeping inflation caused by the recent series of price hikes are crimping household finances and their purchasing power.”
Some 40% of households surveyed said their financial position deteriorated in 4Q13, while 44% of households said their financial position was unchanged. Only 15% of households reported an improvement in their finances during the quarter.
Consumers fear the worst
Zakariah Abdul Rashid MIER
Zakariah Abdul Rashid
Consumers are increasingly pessimistic and are apprehensive of further inflationary pressure on prices, MIER executive director Zakariah Abdul Rashid said.
A vast majority or 92% of households expect higher prices soon, the highest percentage recorded since the inception of the survey. Among the consumers that are the most worried are low-income urban households in the central region.
Consumer expectations, from the survey results, showed little confidence in the “slow labour market.” Throughout 2013, MIER’s Employment Index showed a general decline, in line with the slump in the Consumer Sentiments Index.
On spending, consumers agreed that “now was not a good time to buy or invest in major consumer durables.” Survey results revealed only 27% of consumers thought 4Q13 was a good time to buy such items.
In their concluding statement on consumer sentiment, MIER said: “Consumer spending is therefore expected to remain modest, if not slower, in the coming months.”
Survey at a glance 280114MIER’s Business Conditions Index also took a beating, extending its declining trend to end at 92 points in 4Q13, down 6.6 points from the previous quarter.
The decline in the Business Conditions Index, along with poorer readings in five out of eight components that make up the index indicate a contraction in manufacturing activities in the fourth-quarter last year, MIER concluded.
Inflation the cause
Speaking in a press conference today to launch MIER’s 4Q13 economic reports, Zakariah confirmed the “Consumer Sentiments Index was influenced by inflationary trends.”
He said consumers were no doubt “feeling the pinch” from the “persistent increase in the general price level,” as indicated by the rising inflation rate.
On whether Bank Negara will seek to tighten monetary policy tomorrow during the first Monetary Policy Committee meeting of the year, Zakariah said he expects Bank Negara to leave current interest rates unchanged for the first half of the year.
Eventually some tightening of monetary policy would be required to address inflation, Zakariah added. But any action must also take into account the effect higher interest rates have on the debt burden of households.
~ KiniBiz

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