Friday, February 25, 2011

December 2010 Economic Indicators: Bouncing Up

This report actually got issued at the same time as the CPI, but I hadn’t had time to go into it before this.

Essentially it confirms the insight from the 4Q GDP report – things are indeed looking up:


Although the coincident index has turned down slightly, the leading index has accelerated, which suggests better times ahead:


The numbers indicate 1Q 2011 GDP growth should exceed 4.5% y-o-y (I’m actually thinking 5.0%+), though the runup in oil prices over the past couple of weeks could slow growth after that as it feeds through into the rest of the economy. I’m not sure how big of an impact oil and commodity prices will actually have, as some of the factors are entirely supply related and temporary in nature and markets should “normalise” going into the second half – CPO prices have already fallen on expectations of a better harvest from heavier rainfall.

On the other hand, oil is more than a little worrying, even if the spike in prices are currently entirely driven by uncertainty rather than anything fundamental – OPEC has already committed to meeting any shortfall from Libyan wells. But US$100 oil, if sustained, would be a significant barrier to the higher growth I was thinking we should see this year in developed economies, and contribute to higher inflation in developing economies.

So even as global and Malaysian growth picks up steam, the risk factors are also gaining ground.

Technical Notes:

  1. December 2010 Malaysian Economic Indicators report from the Department of Statistics
  2. DOS also notes that new composite and diffusion indices will be published in March 2011

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