• Distributive trade eased to 6.5% yoy in March
• Motor vehicles plunged 4.6% yoy
• Wholesale trade and retail trade rose by 8.0% yoy and 8.6% yoy respectively
• Mixed retail sales by main economies in March
• Modest domestic spending amid slower external trade activities

Distributive trade grew at a moderate pace of 6.5% yoy in March, after posting 7.4% increase in the previous month. It was the slowest growth since November 2016. However, the sales value returned to above RM100bn and posted at RM103.8bn in March 2018 as compared to RM97.4bn a year ago. The sales value comprises of wholesale trade (RM50.7bn), retail trade (RM40.8bn) and motor vehicles (RM12.3bn) businesses. The slower rate of growth in March was mainly triggered by the motor vehicle which plummeted by 4.6% yoy coupled with a sluggish growth in retail trade (Mar: 8.6%; Feb: 9.2%). Retail trade has been decelerated for fifth consecutive month. In contrast, wholesale trade up to 8.0% yoy in March following a 7.1% rise in a month before.

On monthly basis, the distributive trade rallied to 6.7% in March, after fell by 3.8% in the previous month. This marked the highest increase in one year (Mar 17: 7.6%). The expansion was supported by all segments; wholesale trade (6.8%), retail trade (4.1%) and motor vehicles (16.4%).

Mixed retail sales by main economies in March

Malaysia’s retail sales moderated to 8.6% yoy in March and continued to decelerate for fifth consecutive month. It was the slowest growth in retail sales since August 2016. Looking at the retail trade of other countries, Indonesia’s retail sales expanded by 2.5% yoy in March advancing from a 1.5% increase in the previous month.

Retail sales in Singapore however fell by 1.5% yoy in March after increase significantly at 8.6% in the preceding month. The subdued growth was due partially to lower motor vehicle sales. Retail sales in the United States increased 4.5% yoy in March from 4.1% yoy rise in a month earlier. Eurozone’s retail sales eased to 0.8% in March, following a 1.8% growth in February. Likewise, retail sales in Japan tapered down to 1.0% yoy in March from 1.7% yoy in the previous month. The sales rose at a slower pace for food and beverages, fuel, machinery and equipment. As for China, retail sales expanded higher in March at 10.1% yoy after maintained at 9.7% increase in January and February 2018. It was the steepest increase in retail trade since November 2017. The growth was prompted by the faster pace of sales for building materials, furniture, home appliances, personal care, jewellery, cosmetics and garments.

Modest domestic spending amid slower external trade activities

After a faster-than-expected GDP growth of 5.9% in 4Q17, we expect there would still be some spill-over effect from the growth momentum into the economy as it entered 1Q18. However, we continue to believe that the economy would continue to ease as reflected in the continued slowdown in exports as well as moderation in domestic demand. Distributive trade moderated to 6.5% yoy in March from 7.4% yoy in February with a sluggish growth in retail trade (Mar: 8.6%; Feb: 9.2%) which has been declining for five consecutive months.

Exports registered a sharp slowdown of 5.8% yoy in 1Q18 from 4Q17’s 12.4% and this translated into moderating industrial production by 3.9% in 1Q18 and manufacturing sales in March eased further to 3.9% yoy. Despite slower sales growth and exports, Malaysia's unemployment rate remained unchanged at the end of the first quarter, with the jobless rate came in at 3.3% in March. Still, unfavourable base effect could affect moderating speed in distributive sales performances in 1Q18 and therefore, we forecast private consumption and services sector to grow marginally lower in 1Q18 as compared to 4Q17. Moving ahead, positive labour market indicators as well as resilient lending growth by financial institutions to the household sector suggest that the momentum in consumer spending growth could be sustained.

Source: BIMB Securities Research - 14 May 2018