Malaysian Business Confidence Swung From Negative to Positive. Hiring Plans Barely Moved.
Every major sector turned optimistic for the third quarter, with construction recovering nearly 14 points. But 78.3% of firms expect no change in headcount, and services — the largest sector — was the only one to soften.
Malaysian businesses have turned decisively more optimistic about the current quarter, according to figures published on Thursday, though the improvement has not yet reached their hiring intentions.
The Department of Statistics Malaysia reported that its overall business confidence indicator rose to 5.9% for the third quarter, from negative 1.8% in the second — a swing of nearly eight points, reflecting stronger expectations for both domestic and external activity.
The turnaround was broad. Industry recorded the strongest improvement, rising to 8.2% from negative 3.7%. Construction returned to positive territory at 4.1% from negative 9.5%, a swing of 13.6 points. Wholesale and retail trade improved to 1.2% from negative 7.5%.
Services was the exception. It remained the second most optimistic sector at 5.2%, but eased from 6.2% — the only major category to move the wrong way.
The construction reversal is the standout
A sector that was recording confidence at negative 9.5% one quarter and positive 4.1% the next is not responding to a marginal change in conditions.
Construction also posted the strongest six-month outlook of any sector, with a net balance of 23.3%, ahead of industry at 14.3% and services at 13.1%. Wholesale and retail trade trailed at 5.3%. The overall six-month net balance rose to 12.9% from 7.9%.
That is notable against the second-quarter national accounts, in which construction growth slowed to 6.5% from 7.7%. Builders appear considerably more confident about the period ahead than the recent output data would suggest.
Confidence has not become hiring
The employment figures are where the optimism runs out.
Some 78.3% of businesses expect no change in employment during the third quarter. Just 13.9% expect to increase hiring, while 7.8% anticipate reductions.
Revenue expectations show a similar caution: 31.9% of firms expect gross revenue to rise, 47.4% expect it to remain unchanged, and 20.7% foresee a decline. Nearly half of Malaysian businesses, in other words, expect the quarter to look much like the last one.
A confidence indicator swinging eight points while four in five firms plan no change to headcount describes sentiment improving ahead of activity — which is what a confidence survey is designed to capture, but also a reason to treat the headline swing carefully.
Where the optimism sits
The state-level readings show the recovery is broad but not universal.
Terengganu led at 10.5%, followed by Kuala Lumpur at 9.5% and Negeri Sembilan at 9.4%. Most states recorded positive readings.
Two did not. Melaka came in at negative 3.9% and Labuan at negative 5.4%.
What to watch
Whether hiring follows is the first question. Confidence surveys lead activity, and if the third-quarter employment intentions stay flat into the fourth, the rebound will have been sentiment rather than expansion.
The second is services. It is Malaysia's largest sector and the only one softening, and a further decline would offset gains elsewhere regardless of how construction performs.
The third is what caused the swing. The second-quarter readings were taken during the sharpest phase of the Middle East disruption, when Bank Negara was extending relief financing to affected SMEs. If energy costs continue easing — as they have begun to across the region — the rebound has a straightforward explanation and some durability.