KUALA LUMPUR (Feb 27): A business condition survey done jointly by Federation of Malaysian Manufacturers (FMM) and Malaysian Institute of Economic Research (MIER) shows that business activity is expected to slow down in the first half of 2019 (1H2019).

In a media briefing this afternoon, FMM president Datuk Soh Thian Lai said the survey respondents were more cautious about the outlook for 1H2019, whereby the survey's Business Conditions Index declined 23 points to 101 points, from 124 points in 2H2018.

The survey also showed that the local sales index fell to 94 points in 1H2019, from 113 points in 2H2018, while export sales index dropped to 105 points, from 122 points over the same period, indicating weaker demand.

Nonetheless, Soh said capital investment was higher in 2H2018, and is expected to be similar in 1H2019.

"This is despite growth slowing down, but our respondents are still expected to be investing. It means the confidence level is there," he said.

"Growth is still there, but at a slower pace. The expected index for employment also fell to 105 points in 1H2019 (from 116 points in 2H2018), signalling a slowdown in hiring. Only 20% of respondents indicated that they will likely increase their headcount, down from 27% in the previous survey," he added.

Soh said among the industries that are likely to be hiring are electrical & electronic, petrochemical, transport & warehousing, aerospace, and halal food industries.

In 2H2018, however, Soh said the survey shows that business conditions have picked up after the 14th General Election, as compared to 1H2018.

"Production volume and capacity utilisation shift higher in 2H2018, but it is expected to slow down in 1H2019 on weaker demand, while cost of production continues to be on an upward trend," he said.

Moving forward, Soh commented that government policies should focus on promoting economic growth while reducing cost of doing business.

"They should also increase the confidence of foreign and domestic investors, introduce business-friendly policies, and ensure that they are committed to institutional reforms, especially in terms of anti-corruption," he said.

On the trade tension between the US and China, most respondents were not affected by it.

"To which 63% said their exports are not affected at all, 18% responded positively, while 17% negatively. 73% of respondents said there were no impact on imports, only 15% were affected negatively and 11% positively," he said.