Malaysian consumer spending to rise.

When Market: Asia Pacific last briefly reviewed the Malaysian market in January 2006 (16:1), one of the Malaysian Institute for Economic Research's (MIER) sub headings as they discussed third quarter 2006 consumer sentiment was: "More Cheerful."

As of February 14, 2007, MIER's fourth quarter 2006 consumer research has not changed much. Their sub heading now reads "Year-End Cheer."

And, indeed, Malaysia has something to cheer about. During 2006, the country's Consumer Sentiments Index increased every quarter. The index has been higher in previous quarters, but sentiment has not increased steadily over four quarters since 2003.

The Consumer Sentiments Index in the fourth quarter 2006 was 110.9, up 3.4 points from the third quarter 2006. The fourth quarter 2006 reading was the highest for the year.

On January 31, 2007, the Malaysian Department of Statistics reported that the growth rate of the Leading Economic Index improved from 3.8 percent in October 2006 to 8.5 percent in November 2006. This was the best growth rate of the year for the leading index.

"This scenario suggests that Malaysia's economy will continue with its favorable growth momentum in the second quarter 2007," says the Department of Statistics.

Reasons for consumer optimism, according to MIER, are mainly due to improved employment expectations. The Consumer Sentiments Index correlates very tightly with the country's employment index. Consumers were likewise feeling good about their current incomes, and what they expect to be earning in the year ahead.

MIER said that there was "more bounce in spending plans."

More detail on the status of Malaysia's consumers was added by a February 13, 2007 story published by The New Straits Times (Kuala Lumpur). Six months ago, says the Times, consumer spending was a source of concern for the economy-prompting fears of slower growth. These fears reached Bank Negara Malaysia (Malaysia's central bank), which promptly stopped raising interest rates. The government stepped in as well, holding oil prices steady even as world prices for crude oil rose.

Consumers also benefited from a postponement of a goods and services tax scheduled to be implemented at the start of 2007.

Consumer loans declined, too, and this had a chilling effect on spending. The decline in consumer loans might not have been all bad, though. Malaysian consumers were building debt at a fast pace, and some analysts saw this as cause for alarm.

Finally, citing a local economist at an international bank as its source, the Times said rural incomes would increase in 2007 based party on demand for biofuels.

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