The supermarkets are filled with crowds that enthusiastically buy mandarin oranges, hampers and VSOP brandy. The newspapers, with equal enthusiasm, have started to speculate about the year of the snake. Feng Shui experts and astrologers are making their pronouncements with great enthusiasm.

While everyone is busy shopping or stocking brandy bottles, it is perhaps appropriate in this festive season to take a minute to ask this question: Will the manufacturing sector in Malaysia romp joyously like a lion dancer, or will it slither slowly like a sick snake?

Manufacturing sales at the start of 2000 amounted, roughly, to a modest RM23 billion. By May 2000, manufacturing sales began to show signs of taking a steady upward trend.

In May, sales were about RM27 billion, reaching a peak that was close to RM31 billion in September. Those were promising times. But they did not last as the year 2000 came to a close.

The picture was less upbeat in October when manufacturing sales dropped to RM29.5 billion. It dropped again in November, although only slightly, to RM29.4 billion.

Sharp drop

Imagine a curve that begins at the bottom of a graph in January, and then moves upwards, month-by-month, gradually and steadily. It reaches its peak in September, then declines just as gradually but certainly.

Manufacturing sales are, indeed, going down. The good thing is that they are higher than they were in Jan 2000.

Along with the decline in manufacturing sales comes the decline in the Industrial Production Index (IPI).

The picture for the IPI is not very comforting. In Jan 2000 the IPI recorded a year-on-year growth that exceeded 20 percent. In Nov 2000 we witness an industrial production growth of only 11 percent.

The manufacturing sector is the largest component of the IPI. In Oct 2000 its growth was 25.9 percent. In November the manufacturing sector grew by only 15 percent. Quite a drop, really.

With the drop in the growth of the manufacturing sector, naturally, the sales of the manufacturing sector will drop, as we saw earlier on. Now, an important determinant of the health of the manufacturing sector is the electronics sector.

Monster behind

All is not at its best with the electronics sector. Firms in Malaysia such as Intel Corp, Advanced Micro Devices Inc, Texas Instruments and Sony Corp are keeping lower levels of inventories. It is reported that their purchases of components have been slowing down since Nov 2000.

It should come as no surprise that the share prices of Malaysian chip makes have been falling. One such victim is Unisem Bhd, a major exporter of chips to the United States. Share of Unisem fell, recently, by 12 percent.

The monster behind these disasters is the ailing US economy. The US is expected to go into a recession.

As a result, the American economy is going to experience a smaller growth in imports. Last year the US import growth was nine percent. This year import growth for the US is forecast to touch a mere three per cent.

If the US does not want (or cannot afford) to buy what Malaysia produces, then the Malaysian economy will be affected. This is because the US is an important destination for Malaysian exports.

Who's to blame?

In concrete terms, all of this may mean a lower growth in the GDP for Malaysia. It may mean that there will be some instability in the share prices of chip makers. It may mean that production operators may have fewer opportunities for overtime. Even worse, production operators may have to face retrenchments.

If the economy slips this time, should we blame George Soros? That would be boring because we have blamed him not too long back.

How about Bill Gates? No, we cannot; because then he will not endorse our MSC project.

As you peal your next orange, try to come up with a name. That would be more fun and far easier than trying to overcome our economic dependence on the US.

SHANKARAN NAMBIAR is an economics lecturer at a private institution in Penang.