Business confidence weakens in Q3 2021

Businesses turned more pessimistic in their outlook in the third quarter (Q3) of 2021, according to the latest quarterly survey by the Department of Statistics Malaysia to gauge business performance expectations for the upcoming quarter and six months ahead.

Based on the Business Tendency Survey for Q3 2021, the confidence indicator dipped further to -21.3% in the reference quarter from -3.1% in the preceding quarter.

Chief statistician Mohd Uzir Mahidin said the sectors covered were anticipating unfavourable business conditions for Q3 2021 in light of the severe and prolonged Covid-19 pandemic in the country.

“The confidence indicator of the wholesale and retail trade sector plunged to negative trajectory with -39.4% compared with +5.6% in the second quarter (Q2) of 2021 due to both sub-sectors (wholesale and retail trade) being less confident towards their business situations for the next three months,” he said in a statement today.

Meanwhile, the industry and services sectors also indicated increase pessimism, with the confidence indicator dropping to -11% and -22.8% respectively in Q3 from -1.5% and -6.1% in the previous quarter, he said.

He said the construction sector also anticipated the business situation receding in the reference quarter with a score of -45% against -30.5% in Q2.

“Overall, a net balance of -12.9% indicates that establishments foresee their gross revenue decreasing, of which 23.6% of establishments expect higher gross revenue for the third quarter while 36.5% demonstrate otherwise.

“Simultaneously, 39.9% of establishments predict their gross revenue will remain the same. In terms of employment the majority of establishments (76.5%) anticipate retaining their employees for the reference quarter,” Uzir said.

He also said about 8.5% of respondents were expecting to hire more people while 15% intended to reduce their headcount, resulting in a net balance of -6.5% for Q3 2021.

Looking at the sentiment for the upcoming six months, he said businesses turned pessimistic on their business outlook for the July-December 2021 period with an overall net balance of -21.7% compared to 11% recorded for the period of April to September 2021.

Similar to the three-month outlook, all sectors anticipate negative prospects with the least pessimistic sector being industry.

According to the survey, the industry sector expects business conditions to slip from +12.5% to -11.8% for the second half (H2) of 2021.

At the same time, he said, the services and construction sectors were expecting the business situation to be less favourable for the next six months with a net balance of -14.2% and -24.2% respectively against +8.4% and +6.1% for the period of April to September 2021.

Uzir said the wholesale and retail trade sector also foresaw a challenging business performance in the next six months with a net balance of -59.7% versus +12.5% previously recorded.