• Distributive trade surged by 8.1% in January

• Distributive trade and retail trade expanded by 8.1% yoy and 9.9% yoy respectively

• Malaysia’s retail sales outperformed major economies

• Private consumption to remain strong in 2018

Distributive trade surged by 8.1% yoy as sales value stood at RM101.1bn in January 2018 as compared to RM93.5bn a year ago. The sales value consists of wholesale trade (RM49.8bn), retail trade (RM39.6bn) and motor vehicles (RM11.7bn) businesses. The favorable growth was supported by retail trade (9.9%) businesses.

However, on monthly basis, the distributive trade declined 0.1% in January. This negative growth was dragged down by retail trade (-0.2%) and motor vehicles (-3.0%). On the flip side, the wholesale trade increased by 0.6% in January but slower as compared to the previous month (3.6%).

Malaysia’s retail sales outperformed major economies

Malaysia’s retail sales continued to outperform the ASEAN region by posting 9.9% growth yoy in January 2018, albeit slower than the previous 3 months . The retail sales growth of most economies eased in January whilst Indonesia and Singapore registered a negative growth. Retail sales in Indonesia contracted 1.8% yoy in January after 0.7% rise in the previous month. It was the first shrinkage since July 2017. Whereas, Singapore retail sales declined 8.4% in January from an increase of 6.3% in December 2017. The sales drop was attributed to the Chinese New Year effect which was celebrated in January 2017.

Retail sales in the United States eased to 3.6% yoy in January from a 5.2% expansion in the preceding month. The slower growth was mainly due to the households cutting back on the purchase of motor vehicles and building materials. Excluding autos, gasoline, building materials and food services, retail sales were unchanged last month after a downward revision to a 0.2% decline in December 2017. As for Japan, retail sales moderated to 1.6% yoy from 3.6% while Eurozone’s retail sales increased marginally by 2.3% yoy in January from December’s 2.1%.

Private consumption to remain strong in 2018

Although retail sales slowed in January, its positive trend remains, driven by improved consumer confidence, stable wage growth and continuous rise in passenger movements into the country. Additionally the strengthening of the ringgit and a stronger oil price are key positive to retail sales. Moving ahead, we foresee distributive trade sales to remain robust mostly due to strengthening ringgit which increases purchasing power. We also expect continuous uptrend in both wages and employment provide a bright outlook for the economic activities and will contribute positively towards domestic consumption in 2018. Domestic demand is once again expected to be the key driver of growth, driven by a broad-based increase in both public and private spending. Private consumption is projected to sustain at a reasonably strong pace of 6.5% in 2018.

Source: BIMB Securities Research - 14 Mar 2018