Businesses to likely face the same obstacles in second half of 2022

KUALA LUMPUR: In the next six months, businesses will likely face the same obstacles as they did in the first half of the year, according to the findings of the Federation of Malaysian Manufacturers (FMM)-Malaysian Institute of Economic Research (MIER) Business Conditions Survey for the first half of 2022 (1H2022).

FMM president Tan Sri Soh Thian Lai said the rising cost of raw materials and labour were expected to remain the top two obstacles.

"Third on the list in terms of responses is labour shortage, followed by logistics cost, namely freight and domestic transport cost, as well as the challenges in foreign worker recruitment, including delays, changes in quota and issues with source country, among others," he said during a media briefing in conjunction with the FMM-MIER Business Conditions Survey 1H2022 released today.

The 21st edition of the survey was carried out from July 9 to Aug 12 with 794 respondents, of which 66.1 per cent were small and medium enterprises from 16 industry sub-sectors nationwide.

Soh said business activity in second half of the year was expected to slow down and fall to 94 points from 122 in the first six months of the year.

"Local sales and export sales are also expected to slow down, with production volume and capacity utilisation to shift lower," he said.

He said 57 per cent of respondents said they would likely increase the price of their products and services, while 22 per cent did not intend to adjust their prices soon.

The remaining eight per cent, however, indicated they might lower prices.

Soh noted that business activities and conditions in 1H2022 continued to improve following the uptrend in the second half of 2021 (2H2021).

"The manufacturing sector has gained further momentum in 1H2022. The current cost of production is at 182, indicating the highest level and has replaced 2H2021's reading of 174," he said.

Based on the survey, Soh said the local sales index in 1H2022 was ahead with 99 points, followed by the export sales index with 91 points in recent months.

At the same time, production and capacity utilisation had performed well in 1H2022, with both indexes above the 100-point optimism threshold, he said.

"While the current production index stood at 102, the current capacity utilisation index inched up three points to 101.

"At the same time, the latest capital expenditure (Capex) index has advanced four points from the prior period of 105 to 109.

"Of this, 28 per cent of respondents injected additional Capex, while another 53 per cent maintained their Capex and 19 per cent have cut back on such expenditure," he said.

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