• Distributive trade grew 5.1% mom and 6.8% yoy in May
• Sales value exceeded RM110.0bn in May

• Stronger growth underpinned by positive growth in sales value for all sub sectors

• Growth in global retail sales remained soft

• Retail sales to remain on upward trend

Sales of wholesale & retail trade in May amounted to RM110.8bn, accelerated to 6.8% yoy and higher than the upwardly revised 5.5% registered in the preceding month. The monthly sales value exceeded RM110bn for the first time. Retail sales increased by 7.8% yoy to RM44.1bn, accelerating from an upwardly revised 7.0% rise in the prior month. It was the biggest gain in retail trade since February. The expansion was driven by retail sale of food, beverages & tobacco in specialised stores (May: 9.6%; Apr: 8.8%), retail sale of other goods in specialised stores (May: 9.3%, Apr: 7.8%), retail sale via stalls & markets (May: 9.9%; Apr: 8.2%) and retail sale in non-specialised stores (May: 9.0%; Apr: 8.1%). Likewise, sales of both wholesale trade (May: 5.5%; Apr: 5.3%) and sales of motor vehicles (May: 9.1%; Apr: 2.2%) went up at a faster pace.

On monthly basis, sales value of wholesale & retail trade increased RM5.4bn or 5.1% after registering a decrease of 3.7% in April as sales value for all sub sectors recorded positive growth. Sales of wholesale trade increased 4.2% mom (Apr: -3.8%; Mar: +6.1%; Feb: -5.1%; Jan: +0.2%). Monthly sales of retail trade jumped 5.3% (Apr: -4.0%; Mar: +2.6%; Feb: -3.0%; Jan: -1.8%) while sales value of motor vehicles accelerated 8.8% (Apr: -2.0%; Mar: +16.0%; Feb: -11.7%; Jan: +2.6%).

Growth in global retail sales remained soft

US May retail sales came in at 0.5% mom, and was deemed to be a strong number as reading for April is revised sharply higher to +0.3% from -0.2%. Excluding auto sales, retail sales increased +0.5% mom, higher than the +0.4% expected while the April’s reading was also revised higher to +0.5% from +0.1% previously. Year-on-year, retail trade growth slowed to 3.2% from a revised 3.7% in the previous month. China's retail trade rose by 8.6% yoy in May, following a 7.2% advance in April. Accounting for the latest print, retail sales advanced 8.1% in the first five months of 2019. Retail trade in the Euro Area rose 1.3% yoy in May, following a revised 1.8% growth in April. Japan's retail trade increased 1.2% yoy in May, the most since December, following a downwardly revised 0.4% climb in the previous month. Meanwhile, holy month of Ramadhan pushed retail sales in Indonesia higher by 7.7% yoy in May, accelerating from a 6.7% growth in the previous month. Retail sales in Singapore decreased 2.1% yoy in May after an upwardly revised 1.9% decline in the previous month. This was the fourth straight month of yearly fall in retail trade. On a month-on-month basis, retail sales fell 2.2%. Excluding motor vehicles, retail sales declined 1.0%.

Retail sales to remain on upward trend

Distributive trade grew by 6.8% yoy (Apr: 5.6%yoy) to a new record high of RM110.8bn in May. Retail sales expanded by 7.8%yoy, the highest growth since February. 1Q19 distributive sales expanded at a moderate pace of 6.6%yoy (4Q18: 8.3%) and for 2Q19, we foresee a continuous positive performance in distributive sales. Despite weak internal and external economic environment, the higher growth expected during the 2Q19 mainly due to the Hari Raya period. Looking ahead, we foresee domestic demand to continue increasing in upcoming months buoyed by the OPR cut, stable job market and low inflationary pressure.

Latest data showed that labour market remains stable in May as the labour force grew at 1.9% yoy whilst employment growth recorded at 1.8% yoy. Unemployment rate dip slightly to 3.3% in May from 3.4% in April. The stable job market reflects full-employment condition, healthy development of Malaysia’s economy and provides solid support to domestic demand. Malaysia’s external trade and IPI is expected to expand at steady pace in 2H19 and this will eventually translate into an increase in jobs added, stable wage growth and indirectly provide additional support to Malaysia’s domestic demand and hence we foresee retail sales to remain on upward trend. Therefore, the strong momentum in distributive trade will translate into solid growth for private consumption and services sector.

On the other hand, the consumers spending pattern this year will be highly dependent on the economic performance and the impact of the cost of living. Faced with uncertain global and domestic economic prospects, consumers are expected to be more prudent with their spending and this could affect the consumption.

Source: BIMB Securities Research - 15 Jul 2019