ECO162 Microeconomics

Prepared by: Siti Norbaizura binti Zakariah Norfitrah binti Che Mat Noor Zaty Aizahera binti Salleh Masuriani binti Mat Hashim 2012220824 2012469646 2012411334 2012456344

The Choosen Article

Explanation of the economic concepts in the choosen article

1. Manufacturing activity has improved, as evidenced by a steady rise in the Institute of Supply Management (ISM) new orders component
Explanation: The increased in manufacturing will increase the supply.

2. New jobless claims have also continued to slide despite the relatively loose labor market with an unemployment rate of 8.6%
Explanation: The natural unemployment rate in Malaysia is only 3%

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3. Manufacturing sale statistics expected increase in sales by 6% to 8% in 2012 will lead to a likely growth in Malaysia industrial production that is within our project range.
Explanation: expected increase in manufacturing sales will increase the industrial production 4.

When another mapping exercise is done using the growth rates of the composite Export-IPI indicator (which we define as a simple summation of export and industrial production index growth) and gross domestic product (GDP), we arrive at a possible GDP growth range of 4% to 4.8% for 2012.
Explanation: More export, more GDP growth.

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5. Consumers will continue to support the economy with their spending, although their sentiment may be slightly dented by weak financial market performance and measures undertaken by Bank Negara Malaysia to put a lid on domestic household debt
Explanation: spending-the one economics trigger

6. Anticipate private consumption to grow by 6.4% in 2012 on account of the relatively steady labor market despite the fragility of the manufacturing sector, the feel-good factor brought about by the governments plan to upgrade the salary scale of civil servants in 2012 and the still relatively easy

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7. A vibrant consumer sector following stable labor market conditions, coupled with the rising cost of raw materials, have led to persistent increments in food prices. Indeed, since July 2007, when civil servants last received a broad-based salary revision, prices of food and non-alcoholic beverages have escalated by 23.9% while the headline Consumer Price Index (CPI) has risen by 12.3%.
Explanation: rising cost of materials, will increase the price of food.

8. The concern over food prices is due to unfavorable supply factors as Malaysia remains a major importer of food and a trickle-down effect from continual subsidy-rationalisation efforts by the government.
Explanation: continual subsidy given by the government is the way to protect the local food.

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9. As for the ringgit, judging by the outlook for growth and inflation, interest rate expectations as well as the trend in capital flows, we expect the ringgit to continue hovering above the RM3 level against the US dollar in 2012
Explanation: expectation of interest rate will affect the currency.

10. Malaysias tax-to-GDP ratio is one of the highest in the region. Barring any unforeseen need to aggressively expand fiscal policy to support growth and with an increase in the efficiency of revenue collection as well as the governments cautious expenditure patterns, we opine that the 4.7% deficit target level is well within reach in 2012