The parties are over, time to face the crunch
Shankaran NambiarPublished: Feb 1, 2001 6:07 AM | Updated: Jan 29, 2008 6:21 PM
It is nice to start the year with festivities. January 2001 has been such a month.
First there was Hari Raya to celebrate. Christmas was, inevitably, followed by the New Year celebrations. Now, we are in the midst of the Chinese New Year.
A few common threads run through these festivals and celebrations. People shop frantically for these events. They also feast without restraint; and that, again, means more shopping. When the statisticians have done their sums we can expect January 2001 to record a relatively high level of consumption expenditure.
Private consumption expenditure was mixed last year. Bank Negara statistics indicate that consumption credit was on the rise in 2000. In January 2000, consumption credit grew by about four percent. By November last year the figure had reached 15 percent.
Consumption credit is an indicator for private consumption. Passenger car sales and the import of consumption goods are two other indicators. Both indicators observed a closely related trend last year.
The import of consumption goods grew by about 18 percent month-on-month in January 2000. In March the import of consumption goods reached a peak, with a growth of slightly more than 25 percent. This high rate of growth was again repeated in the month of June.
In September 2000 the import of consumption goods took a dip, registering a growth that was close to one percent. The figure did pick up in October, close to five percent.
Passenger car sales, the other indicator of private consumption, also grew by about 18 percent in January 2000. The growth in passenger car sales reached an annual high of 35 percent in June. In September 2000 the figure took a dive down, touching a growth of less than five percent. The following month there was some recovery when this indicator reached 15 percent.
Slowdown up ahead
We see that the year 2000 started with passenger care sales and the import of consumption goods growing at about the same rate. Both figures peaked in June; both reached a bottom in September; and both enjoyed some recovery towards the end of the year. Both indicators did not do as well in October as compared to January 2000, let alone the giddy heights of June.
Private consumption growth in 2000, according to some estimates, is calculated to stand at 13 percent. The forecast for this year is, sadly, placed at a more modest 10 percent.
The writing on the wall does not seem to bode well. In the months to come it is likely that the clash of cymbals will be muted and the drums will roll more sedately. We have, after all, enjoyed our Chinese New Year. Some may have even gained from the rally in the Kuala Lumpur Stock Exchange. The time for shopping with abandon is over. It is now time to confront flagging levels of confidence.
The Malaysian Institute of Economic Research (Mier) conducts a regular survey on consumer confidence. Recently, it announced the results of its Consumer Sentiments Survey for the fourth quarter of 2000. Its findings indicate that private consumption is likely to head for a slowdown.
Mier measures consumer confidence using a statistic known as the Consumer Sentiments Index (CSI). The CSI was close to 120 points in September 2000. In December 2000, the CSI was about 115 points.
The CSI for the fourth quarter of 1999 was 117.7. The CSI for the same period in 2000 was 115.6.
If we pick the CSI in June 1997, when the effects of the financial crisis were to be felt, we find that the figure is, roughly, 130 points.
Of course, in 1998, in the months following the 1997 crisis, the CSI barely managed to hover around 70 points.
While consumer confidence at the present time is not as pessimistic as it was in 1998, it is not as robust as it was in mid-1997.
The Mier survey indicates that consumers are planning to postpone expenditure on houses, cars, furniture and other consumer durables.
Shopping important
Shopping is important to capitalist economies. By shopping we mean not only what is bought in wet markets or the shirts and skirts bought in supermarkets. We also include the purchase of refrigerators, cars, houses and furniture.
The magnitude and significance of "shopping" becomes obvious if we note that consumption expenditure accounts for no less than 45 percent of the country's gross domestic product (GDP). Consumer expenditure is a powerful engine for growth.
The more some people shop, the more others produce. The more others produce, the more we earn. The more we earn, the more we shop. The more we shop, the more the economy grows, the more the GDP grows. Consumer expenditure is a powerful engine for growth. And that is the way we go round the mulberry bush.
With shrinking consumption we may be going round the prickly pear this year. Meanwhile, the government's forecast of seven percent GDP growth may be the mulberry bush we can all fantasise about.
SHANKARAN NAMBIAR is an economics lecturer at a private institution in Penang.
First there was Hari Raya to celebrate. Christmas was, inevitably, followed by the New Year celebrations. Now, we are in the midst of the Chinese New Year.
A few common threads run through these festivals and celebrations. People shop frantically for these events. They also feast without restraint; and that, again, means more shopping. When the statisticians have done their sums we can expect January 2001 to record a relatively high level of consumption expenditure.
Private consumption expenditure was mixed last year. Bank Negara statistics indicate that consumption credit was on the rise in 2000. In January 2000, consumption credit grew by about four percent. By November last year the figure had reached 15 percent.
Consumption credit is an indicator for private consumption. Passenger car sales and the import of consumption goods are two other indicators. Both indicators observed a closely related trend last year.
The import of consumption goods grew by about 18 percent month-on-month in January 2000. In March the import of consumption goods reached a peak, with a growth of slightly more than 25 percent. This high rate of growth was again repeated in the month of June.
In September 2000 the import of consumption goods took a dip, registering a growth that was close to one percent. The figure did pick up in October, close to five percent.
Passenger car sales, the other indicator of private consumption, also grew by about 18 percent in January 2000. The growth in passenger car sales reached an annual high of 35 percent in June. In September 2000 the figure took a dive down, touching a growth of less than five percent. The following month there was some recovery when this indicator reached 15 percent.
Slowdown up ahead
We see that the year 2000 started with passenger care sales and the import of consumption goods growing at about the same rate. Both figures peaked in June; both reached a bottom in September; and both enjoyed some recovery towards the end of the year. Both indicators did not do as well in October as compared to January 2000, let alone the giddy heights of June.
Private consumption growth in 2000, according to some estimates, is calculated to stand at 13 percent. The forecast for this year is, sadly, placed at a more modest 10 percent.
The writing on the wall does not seem to bode well. In the months to come it is likely that the clash of cymbals will be muted and the drums will roll more sedately. We have, after all, enjoyed our Chinese New Year. Some may have even gained from the rally in the Kuala Lumpur Stock Exchange. The time for shopping with abandon is over. It is now time to confront flagging levels of confidence.
The Malaysian Institute of Economic Research (Mier) conducts a regular survey on consumer confidence. Recently, it announced the results of its Consumer Sentiments Survey for the fourth quarter of 2000. Its findings indicate that private consumption is likely to head for a slowdown.
Mier measures consumer confidence using a statistic known as the Consumer Sentiments Index (CSI). The CSI was close to 120 points in September 2000. In December 2000, the CSI was about 115 points.
The CSI for the fourth quarter of 1999 was 117.7. The CSI for the same period in 2000 was 115.6.
If we pick the CSI in June 1997, when the effects of the financial crisis were to be felt, we find that the figure is, roughly, 130 points.
Of course, in 1998, in the months following the 1997 crisis, the CSI barely managed to hover around 70 points.
While consumer confidence at the present time is not as pessimistic as it was in 1998, it is not as robust as it was in mid-1997.
The Mier survey indicates that consumers are planning to postpone expenditure on houses, cars, furniture and other consumer durables.
Shopping important
Shopping is important to capitalist economies. By shopping we mean not only what is bought in wet markets or the shirts and skirts bought in supermarkets. We also include the purchase of refrigerators, cars, houses and furniture.
The magnitude and significance of "shopping" becomes obvious if we note that consumption expenditure accounts for no less than 45 percent of the country's gross domestic product (GDP). Consumer expenditure is a powerful engine for growth.
The more some people shop, the more others produce. The more others produce, the more we earn. The more we earn, the more we shop. The more we shop, the more the economy grows, the more the GDP grows. Consumer expenditure is a powerful engine for growth. And that is the way we go round the mulberry bush.
With shrinking consumption we may be going round the prickly pear this year. Meanwhile, the government's forecast of seven percent GDP growth may be the mulberry bush we can all fantasise about.
SHANKARAN NAMBIAR is an economics lecturer at a private institution in Penang.
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