Malaysian manufacturing sales up strongly in December
Local manufacturing sales posted a double-digit y-o-y growth of 16.2% to RM43.3 billion in December 2009, from RM37.3 billion the year before, up the first time after 13 consecutive months of contraction. This was in line with a strong rebound in the export of manufactured goods, on the back of a sustained increase in external demand. Manufacturing sales contracted 9.6% in November and were -3.7% in October 2009. For the full year, manufacturing sales were down 18.9% or RM109.7 billion to RM469.6 billion.

Manufacturers recruited workers for the last seven consecutive months up to December. A total of 2,976 workers were employed in December, higher than 2,268 workers in November and 1,353 workers in October. Compared with a year ago, however, total employment in the manufacturing sector fell by a larger magnitude of 4.8% or 47,751 persons to 944,024 persons in December (-3.7% in November) due partly to a higher base effect.

Malaysia’s IPI rebounds to 8.9% y-o-y in December
Industrial production rebounded to +8.9% y-o-y in December, ahead of a consensus forecast of 7.6%, after contracting 0.8% in November. The pick-up in industrial activities was due to stronger growth in manufacturing production and electricity output. These were aided by a smaller decline in mining production, which decreased by 0.2% during the month. The IPI had also increased 4.6% m-o-m in December. For 4Q2009, industrial production turned around to record a growth of 2.9% y-o-y, improving from -7% in 3Q. This was the first increase after four consecutive quarters of contraction, pointing to a turnaround in economic activities. The pick-up was underpinned by a turnaround in manufacturing production, which bounced back to increase by 5.1% y-o-y in 4Q, from -9.1% in 3Q. For the full-year 2009, industrial production contracted by 7.6% versus the same period last year, after slowing down to +0.7% in 2008, due to the global recession on the back of the credit crisis in developed economies.

Bernanke hints Fed may up discount rate ‘before long’
The US Federal Reserve may raise the discount rate “before long” as part of the “normalisation” of Fed lending, a move that won’t signal any change in the outlook for monetary policy, Chairman Ben Bernanke said Feb 10. The Fed may also temporarily replace the federal funds rate (what banks charge one another for overnight loans) as a policy guide with interest it pays on banks’ deposits should fed funds become a “less reliable indicator than usual,” Bernanke said. “Before long, we expect to consider a modest increase in the spread between the discount rate and the target federal funds rate,” Bernanke said. The change is “not expected to lead to tighter financial conditions for households and businesses and should not be interpreted as signalling any change in the outlook for monetary policy, which remains about the same as it was at the time of the January meeting of the FOMC (Federal Open Market Committee).”  A discount-rate change would bring Bernanke back to the first instrument he used when he attacked the financial crisis — lowering the cost of bank liquidity.

China’s January loans surge as property prices climb
China’s lending surged to RMB1.39 trillion (US$203 billion) in January, and property prices climbed the most in 21 months as banks extended more credit in anticipation the government will tighten monetary policy. Lending was higher than in the previous three months combined, data on the central bank’s website showed Feb 11. Property prices in 70 cities rose 9.5% from a year earlier, the National Development and Reform Commission said separately. Economists were split on whether an unexpected slowdown in inflation to 1.5% in January gives policymakers room to withdraw stimulus more slowly. January’s lending was 14% less than a year earlier, after the government targeted a reduction in new loans this year to RMB7.5 trillion from a record RMB9.59 trillion in 2009. Lending is biggest in the first quarter of each year. Central bank Governor Zhou Xiaochuan last week said price increases would be “closely” monitored, after saying last year that developing economies can accept inflation of more than 2%.

Indonesia’s real GDP 5.4% in 4QIndonesia’s real GDP growth strengthened to 5.4% y-o-y in 4Q, picking up a second straight quarter, suggesting that the Indonesian economy continued to improve on the back of the government’s stimulus spending and recovery in exports. Real GDP was +4.2% in 3Q and +4.1% in 2Q. Government spending rebounded to +17.0% y-o-y in 4Q, from +10.3% in 3Q. In tandem with higher government spending, investment grew at a faster pace of 4.2% y-o-y in 4Q, compared with +3.2% in 3Q. These were aided by a rebound in real exports, which grew by 3.7% y-o-y in 4Q, a turnaround from -7.8% in 3Q, in line with a recovery in global demand. These were, however, offset partially by a slowdown in consumer spending, which eased to 4% y-o-y in 4Q, from +4.8% in 3Q. For the full year, the country’s real GDP slowed down to 4.6% in 2009, from +6% in 2008, as a drop in exports dragged down investment and consumer spending.

China’s exports strengthens in January
China’s export growth strengthened to 21% y-o-y in January, from +17.7% in December. This was the second straight month of increase due partly to a lower base effect and partly to an improvement in global demand. Stronger growth was due to a pick-up in exports to the European Union, the largest export markets for China, which grew by 17.7% y-o-y in December, faster than +10.2% in November. Stronger growth in exports to Hong Kong, South Korea, Taiwan, Asean and South Africa as well as a turnaround in exports to Russia also helped. These were, however, offset partially by a slowdown in exports to the US, Japan and India. Similarly, China’s imports surged by 85.5% y-o-y in January, compared with +55.9% in December and +26.7% in November. This was the third straight month of picking up, pointing to a pick-up in domestic demand.

Japan’s core machinery orders rise in December
Japan’s core machinery orders, excluding volatile orders for ships and orders placed by electric power companies, surged by 20.1% m-o-m in December, a rebound from -11.3% in November. This was ahead of economists’ forecast, suggesting that businesses are likely to increase spending in the months ahead, in line with an improvement in the global economy prospects. Y-o-y, the decline in Japan’s core machinery orders narrowed significantly to -1.5% in December, from -20.5% in November. This was the smallest decline in 18 months, pointing to an improvement in business spending.

US exports up but trade deficit widens in December
US exports strengthened further to +3.3% m-o-m in December, from +0.9% in November and +2.7% in October. This was the eighth consecutive month of increase. Stronger growth was underpinned by a pick-up in the export of capital goods such as computers and parts, civilian aircraft, industrial supplies, consumer goods and automotives. These were, however, offset partially by a decline in the export of semiconductors. As a result, US exports bounced back to increase by 7.4% y-o-y in December, the first increase in 14 months and from -2.4% in November and -8.5% in October. Similarly, imports grew at a faster pace of 4.8% m-o-m in December, compared with +2.6% in November and +0.7% in October, due to a pick-up in the imports of capital goods such as civilian aircraft and a smaller decline in the exports of semiconductors. Y-o-y, imports rebounded to increase by 4.6% in December, from -5.6% in November, the first increase in 14 months. The faster m-o-m increase in imports than exports caused the US trade deficit to widen to US$40.2 billion in December, from a deficit of US$36.4 billion in November. For the full-year, US trade deficit narrowed significantly by 45.3% to US$380.7 billion in 2009, from a deficit of US$695.9 billion in 2008.

European Union may bail out Greece
The European Union (EU) said Feb 9 that it is considering assistance for Greece as it struggles to contain its budget deficit, which threatens to erode confidence in  Euroland. Signs a rescue may be in the works helped ease investors’ jitters over the spread of a fiscal crisis to other nations in the region such as Portugal, Spain and Ireland, and provided some support to the euro. Greece floated new steps on Feb 9 to bring down the budget deficit to 8.7% of GDP in 2010, from a deficit of 12.7% in 2009. The measures include cuts of as much as 5.5% in government workers’ wages and a waiver on taxes for Greeks who repatriate funds held in foreign accounts. Earlier, Greece on Feb 2 proposed to freeze public sector wages and impose higher fuel taxes. The move has resulted in a wave of strikes, as starting Feb 10 schools, hospitals and flights would be shut down to protest the deficit-reduction plans.

OECD composite leading indicator points to improved outlook
OECD composite leading indicator’s 12-month rate of change picked up to 8.3 in December, from +6.1% in November and +3.6% in October. The fourth consecutive month of increase was underpinned by a pick-up in the US and Canada’s sub-indices, which grew by 7.3% and 6.7% respectively in December. This was aided by stronger growth in the Euroland and UK’s sub-indices, suggesting that these economies will likely improve as well in the months ahead. In Asia, Japan, India and Indonesia’s sub-indices continued to strengthen, while China’s sub-index moderated somewhat, but remained strong during the month, suggesting that economic activities in these countries will likely improve in the months ahead. These were aided by an improvement in Brazil, Russia and South Africa’s sub-indices during the month.



This article appeared in Corporate page of The Edge Malaysia, Issue 793, Feb 15-21, 2010.