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Persistent trade-tensions and subdued demand for technology products to cap the upside on overall investment activity from re-negotiated public projects in Malaysia, according to the latest report from ANZ Research.
Private consumption, the mainstay of growth, accelerated to 7.8 percent in the quarter (Q1: 7.6 percent y/y). Meanwhile, public consumption growth moderated to 0.3 percent y/y in Q2, after rising 6.3 percent y/y in Q1 19. Export growth was unchanged from the previous quarter at 0.1 percent y/y as external demand remains weak.
At the same time, imports contracted by 2.1 percent y/y (Q1: -1.4 percent y/y) as intermediate and capital goods imports weakened. Consequently, net trade made a larger positive contribution to growth in Q2 than in Q1 (1.4ppt in Q2 compared to 0.9ppt in Q1). Investment contracted for the second straight quarter, although it posed a smaller drag of 0.2ppt to overall growth in Q2 (Q1: -0.9ppt).
Gross fixed capital formation contracted by 0.6 percent y/y (Q1: -3.5 percent y/y) on the back of a 4.2 percent y/y decline (Q1: -7.4 percent) in ‘machinery and equipment’ investment. Public investment remained weak (Q2: -9.0 percent y/y), although private investment improved to 1.8 percent y/y in Q2, from 0.4 percent previously.
On the other hand, inventories were drawn down at a quicker pace than in Q1, and so accounted for a larger drag on growth in the quarter. (0.7ppt in Q2 compared to 0.5ppt in Q1). From a sector perspective, the performance was mixed.
Activity in agriculture and services sectors moderated to 4.2 percent y/y and 6.1 percent y/y in Q2 (from 5.6 percent and 6.4 percent respectively in Q1). However, a rebound in the mining and quarrying sector (particularly natural gas) provided an offset. At the same time, manufacturing activity posted a marginal improvement (Q2: 4.3 percent y/y, Q1: 4.2 percent y/y).
