PETALING JAYA: It is clear that Malaysia's economy is heading towards a slower growth momentum, as suggested by the latest reading of the country's Leading Index.

The Leading Index, which gauges the country's economic activity and direction in the months ahead, registered its slowest growth rate in eight months at 0.7% year-on-year for November 2011, after a growth of 2.4% year-on-year in the preceding month.

According to CIMB Research, the slower growth momentum is attributable to the strengthening of external headwinds, which are weighing on the country's exports and industrial output.

“We foresee external headwinds gathering pace, given the eurozone debt crisis that could have far-reaching ripple effects on the rest of the world,” the brokerage said in a report.

“Both the current and leading global indicators flag a weakening of global demand,” it said, maintaining its view of a decelerating growth trend for Malaysia from the fourth quarter of 2011 onwards.

Earlier, a leading indicator for November published by the Organisation for Economic Cooperation and Development showed that the index dipped 0.1 points to 100.1.

The ninth straight month of decrease suggested that growth in most of the world's major economies would likely to decelerate further in the months ahead.

“Despite the presence of domestic drivers for the economy, we think that ultimately, external headwinds are a bigger force to contend with. Sustained domestic demand growth is unlikely to fully offset the downturn of the external sector,” CIMB Research said.

ECM Libra shared the same sentiment. In its report, the local investment bank argued that further proofs of an impending slowdown for Malaysia's economy could also be seen in the moderation of inflation and the drop in industrial production index (IPI).

Malaysia's consumer price index, which gauged the country's inflation, rose 3% year-on-year last December, compared with a rise of 3.3% year-on-year in the preceding month.

The country's IPI last November grew only 1.8% year-on-year, compared with a growth of 3.5% year-on-year in the preceding month.

“As argued previously, the moderation in inflation is due to the slack in demand-pull inflation globally,” ECM Libra said.

CIMB Research forecast the growth of Malaysia's gross domestic product (GDP), or the total value of goods and services produced in the economy, to slow to 3.8% this year from an estimated 5% in 2011.

ECM Libra, on the other hand, expected GDP growth for 2012 to be around 4%.