KUALA LUMPUR (Aug 25): The Leading Index (LI) rose by a mere 0.5% year-on-year in June, compared with the 6.9% annual growth registered in the previous month, signalling continued challenges for Malaysia's near-term economic prospects, said the Department of Statistics Malaysia (DOSM).

Chief Statistician Datuk Seri Dr Mohd Uzir Mahidin said in a statement that the LI, which is used to anticipate economic upturns and downturns an average of four to six months ahead, continued to register growth, to 105.6 points from 105.1 points in the same month last year.

According to him, the increase was mainly contributed by real imports of other basic precious and other non-ferrous metals driven by imports of copper-based metals.

However, the LI declined 2.8% month-on-month (m-o-m), reflected by the reduction in all of LI components, mainly the number of housing units approved, which contracted by 0.9%.

"Looking at the direction indicated by the decreasing growth rate of smoothed LI despite remaining above the trend, the LI indicates that Malaysia's near-term economic prospect continues to face challenges.

"This is in line with the forecasts by international and national agencies that expect a slower economic outlook for Malaysia in 2021," said Mohd Uzir.

However, he noted that the positive impacts from various government initiatives to support business continuity, along with the progress of Covid-19 vaccination rates, may stimulate the business confidence and hence support the economic recovery.

Meanwhile, the coincident index (CI) maintained its positive annual momentum for the past three months, shrinking by 3% in June following the implementation of Movement Control Order 3.0.

The performance of the CI, which reflects the current economic activity, further contracted by 6.3% month-on-month against a decline of 1.3% recorded in the preceding month, due to the noticeable decline in capacity utilisation in the manufacturing sector (-4.5%).