KUALA LUMPUR (July 20): Although Malaysia's consumer sentiments index (CSI) compiled by the Malaysian Research Institute (MIER) shot to a 21-year high for the second quarter of 2018, it is unlikely to stimulate an already slowing economy by much, according to Nomura Global Markets Research.

"The improvement in consumer sentiment should support private consumption but, in our view, it is unlikely to improve to the extent the government expects, as boosts from lower consumer price index (CPI) inflation tend to be modest," Nomura said in a note today.

Additionally, hard activity data already points to a slowing economy, the research house said.

"We estimate second quarter gross domestic product (GDP) growth is tracking 5% year-on-year, moderating from 5.4% in the first quarter, dragged down by a likely slowdown in industrial production and a sharp decline in crude palm oil production," Nomura noted.

The research house maintained its full-year GDP forecast of 5.1% in 2018 from 5.9% last year.

Yesterday, MIER reported that Malaysia's CSI had leaped to 132.9 points in 2Q18 from 91 points in the previous quarter, which Nomura said is likely reflective of post-election optimism after the Pakatan Harapan coalition won the election.

It pointed out that the new government had "quickly announced populist measures" such as the zero-rating of the goods and services tax and the reinstatement of fuel subsidies.