Manufacturing hurtles down a cliff Source: Statistics Department, Malaysia
There are three components to our Industrial Production Index — manufacturing, mining and electricity. Manufacturing (see dotted line), the most crucial, appears to be in free fall by December.
Manufacturing accounts for 71 per cent of the Index and contributes 28 per cent of GDP. It also employs 20 per cent of workers. And then there’s the ‘multiplier effect’ on the rest of the economy.
While manufacturing plummets, the Consumer Price Index for food remains high – even though commodity prices have slumped.
Although the overall CPI for December year-on-year (yoy) has eased to 4.4 per cent from 8.5 per cent last July, the food component remains at 10.4 per cent, slightly down 12.3 per cent yoy last September.
Thus even though the economy is slowing sharply and jobs are being lost or trimmed, the lower income group are still hurting the most as a much larger proportion of their budgets are spent on food.
Look no further than the price of rice. International rice prices have dropped by more than 50 per cent (export price for Thai A1 Super, the cheapest, has dropped from a high of US$772/tonne in May 2008 to US$310/tonne in December 2008 – lower than the Dec 2007 price). But have local retail prices, apart from subsidised Bernas rice, dropped correspondingly?