A survey by the Department of Statistics Malaysia (DOSM) has pointed to a 27.3% increase on household expenditure on food and non-alcoholic items during the movement control order (MCO) due to the closure of non-essential activities. The survey showed that expenditure from the T20 segment fell the most by 59%, followed by the M40 (-48%) and B40 (-41%).

The huge fall in the T20’s expenditure was due to the drop in discretionary spending that makes up a huge proportion of their spending compared to essential goods. And the T20’s expenditure would have dropped steeper if all households did not accept the official loan moratorium by 63%. Likewise, for the M40 and B40, their expenditure would have fallen by 54% and 49%, respectively.

The findings of the DOSM survey should not come as a surprise. With the combination of supply chain disruptions, jobs layoffs and uncertainties, the outlook for private consumption, which remains the anchor of growth, will remain weak, largely supported by spending on necessities during the MCO period. However, once the MCO is lifted, pent-up demand is expected to kick in and provide a positive lift to private consumption. On that note, private consumption for 2020 is likely to grow around 2%–2.5% from 7.6% in 2019.

• Distributive sales continued to report a steady growth in February. It rose 5.3% y/y from 5.4% y/y in January largely supported by the stronger motor vehicle sales, which were up 3.5% y/y from 1.0% y/y in January. Besides the strong motor vehicle sales, wholesale and retail trade (WRTS) grew moderately by 4.9% y/y and 6.3% y/y.

• The moderate growth in WRTS was in line with the survey conducted by the Department of Statistics Malaysia (DOSM). It should be noted that household expenditure that was based on: (1) consumption expenditure that takes into account of 12 main groups in the CPI basket of goods and services; and (2) non-consumption expenditure i.e. income tax, EPF, Socso and loan repayments which fell 48%–55% during the MCO period.

• The survey found a 27.3% increase on household expenditure on food and non-alcoholic items during the MCO due to the closure of non-essential activities. In contrast, there was a huge drop in household expenditure in areas like clothing (-94.9%); transport (-89.0%); hotels & restaurant (-86.5%); furnishings; and household equipment & routine household maintenance (-72%); alcoholic beverages & tobacco (71%).; healthcare (-37.3%) and miscellaneous goods & services (-38.5%). Meanwhile, utilities consumption grew by 50% with no change to education and communication as a result of access via online platforms.

• The survey showed that expenditure from the T20 segment fell the most by 59% followed by the M40 (-48%) and B40 (-41%). The huge fall in T20 expenditure was due to the drop in discretionary spending that makes up a huge proportion of their spending compared to essential goods. And the T20’s expenditure would have dropped steeper if all households did not accept the official loan moratorium by 63%. Likewise, for the M40 and B40, their expenditure would have fallen by 54% and 49%, respectively.

• The survey pointed out expenditure from T20 fell the most by 59% followed by the M40 (-48%) and B40 (-41%). Huge fall in T20 expenditure was due to the drop discretionary spending that makes up a huge proportion of their spending compared to essential goods. And T20’s expenditure would have dropped steeper if all households did not accept the official loan moratorium by 63%. Likewise, for M40 and B40 expenditure would have fallen by 54% and 49%, respectively.

• Findings of the DOSM survey should not come as a surprise. With the combination of supply chain disruptions, jobs layoffs and uncertainties, the outlook for private consumption, which remains the anchor of growth, will remain weak, largely supported by spending on necessities during the MCO period. However, once the MCO is lifted, pent-up demand is expected to kick in and provide a positive lift to private consumption. On that note, private consumption for 2020 is likely to grow around 2%–2.5% from 7.6% in 2019.

Source: AmInvest Research - 13 Apr 2020