• Distributive trade sales value grew 5.3% yoy in November
• Sales value increased to RM111.8bn in November
• Better performance underpinned by retail and wholesale sales
• Growth in global retail sales remained soft
• Visit Malaysia 2020 could support retail market performance

Distributive trade growth inched higher to 5.3% yoy to RM111.8bn in November backed by better gain in both retail and wholesale trade. Retail trade increased RM3.0bn (7.0% yoy). Similarly, wholesale trade and motor vehicles rose RM2.2bn (4.3% yoy) and RM0.4bn (+3.0% yoy) respectively.

Retail sales increased by 7.0% yoy to RM45.9bn. The expansion was fuelled by retail sale of other goods in specialised stores and retail sale via stalls & market which recorded 8.6% respectively. This was followed by retail sale of food, beverages & tobacco in specialised stores (8.4%), retail sale in non-specialised stores (8.3%) and retail trade not in stores, stalls or markets (8.2%).

On monthly basis, sales value of wholesale & retail trade increased RM0.5bn or 0.4%, slightly slower when compared to 0.6% growth in October. Monthly sales of retail trade jumped 2.3% but sales value of motor vehicles slowed to 0.5%. Sales of wholesale trade decreased 1.2% mom.

Meanwhile, volume index of wholesale & retail trade posted a growth of 5.6% to reach 131.4 points as compared to the same month of the previous year. The key contributor for this growth was retail trade with 6.9%. This was followed by wholesale trade (4.8%) and motor vehicles (3.1%).

Growth in global retail sales remained soft

Indonesia's retail sales grew positively in November 2019 in spite of having slowed down in comparison with a month earlier. Retail trade in Indonesia increased 1.3% yoy in November, plummeting from 3.6% yoy a month before. This was the fifth straight month increase in retail sales. On a monthly basis, retail sales went up by 0.4% in November, the second straight month increase in six months. Retail sales in Singapore slid for the tenth consecutive month in November, weighed down again by falling vehicle sales. Retail sales dropped by 4.0% yoy in November, the ninth straight month of fall, after an upwardly revised 4.4% drop in the prior month. Excluding big-ticket motor vehicles, retail sales fell 0.6% yoy. On a monthly basis, retail sales went up 0.2% in November, following an upwardly revised 2.4% fall in October.

US retail sales increased less than expected in November as Americans cut back on discretionary spending. Retail sales rose 0.2% mom, easing from a revised 0.4% growth in October. On annual basis, retail trade increased 3.3% yoy in November. Excluding automobiles, gasoline, building materials and food services, retail sales edged up 0.1% mom in November after rising by an unrevised 0.3% in October. The so-called core retail sales correspond most closely with the consumer spending component of gross domestic product. Consumer spending, which accounts for more than two-thirds of US economic activity, grew at a 2.9% annualized rate in 3Q19. US economy expanded at a 2.1% pace in 3Q19. Eurozone's retail trade increased 1.0% mom in November of 2019, rebounding from a downwardly revised 0.3% decline in October. On a yearly basis, retail trade growth accelerated to 2.2% in November from a revised 1.7% in the previous month.

China’s retail sales rose 8.0% yoy in November, following a 7.2% gain in the previous month, buoyed by stimulus measures and the November Singles Day shopping extravaganza. This marked the biggest rise in retail trade since June 2019. Considering the January to November period, retail sales rose 8.0% from the corresponding period a year earlier. According to Commerce Ministry China's retail sales are expected to increase 8.0% in 2019 to CNY41.1tn (USD5.88tn). That compared with a 9.0% rise in retail sales in 2018.

Japan’s retail sales declined by 2.1% yoy in November, after a 7.0% fall in the previous month, as consumer sentiment remained depressed after October’s sales tax hike. On a monthly basis, retail sales advanced 4.5% in November, following a revised 14.2% fall in October. The negative impact from the sales tax hike in retail sales will likely continue and the focus is whether private consumption will start picking up this year. The weak readings could pressure the government to come up with new ways to boost growth and force the central bank to maintain its stimulus program to prevent the economy from slipping into recession.

Visit Malaysia 2020 could support retail market performance

Distributive trade growth inched higher to 5.3% yoy in November 2019 backed by better gain in both retail and wholesale trade. Retail and wholesale sales advanced at higher pace of 7.0% yoy and 4.3% yoy respectively partly attributed to Single Day and Black Friday sales.

Continuous positive performance in distributive sales could see higher growth of distributive sales in 4Q19. For 3Q19, distributive sales expanded at a moderating pace of 5.7% yoy, the lowest rate in three years compared to 6.1% yoy in 2Q19.

Encouraging trend of distributive sales in 2019 is expected to continue in 2020. However, expectation on rising inflationary pressure and slightly easing employment on top of currency risk could stifle domestic demand. Consequently, we are projecting private consumption growth to decelerate (2020f: 6.8%; 2019f: 7.4%) as consumers turn cautious due to slower income growth amid slow business spending and global economic uncertainty.

Looking ahead, the year 2020 will remain a challenge for the Malaysian retail industry. Externally, trade disputes among countries are not expected to end soon. Internally, economic policies that can stimulate consumer spending are limited in the near term.

The retail performance so far has been quite sluggish. As such, most retailers tone down their growth expectations and the performance of Malaysia’s retail market this year will depend on the growth of tourist arrivals spurred by the Visit Malaysia 2020 (VM2020) campaign. The outlook is positive, but very cautiously so and much would hinge on the growth of tourist arrivals this year, given that it is going to be a VM2020. Under the VM2020 campaign, the country is eyeing 30 million tourist arrivals, with a targeted income of RM100.0bn. For 2019, the Ministry of Tourism, Arts and Culture (Motac) aims to welcome 28.1 million tourists and collect RM92.2bn worth of tourist receipts. Domestic retail industry growth slumped to 1.8% in 3Q19 from a 6.7% growth in the same quarter last year. According to Retail Group Malaysia (RGM), Malaysia’s retail sales growth forecast for 2019 has been revised downwards for the third time following a lower-than-expected performance in 3Q19 and a weak projection for the rest of the year. Retail sales in 3Q19 grew a mere 1.8%.

Accordingly, retail sales growth from January to September was at 3.6%, compared with a 4.3% growth in the corresponding period of 2018. The poor performance in 3Q19 was also a result of a high base rate previous year as well as the low consumer confidence.

Retailers are expected to see RM107.5bn in sales in 2019 - a 3.7% growth. The 3.7% retail growth projection for 2019 is lower than the earlier projection of 4.4%. Retail sales grew 3.9% in 2018. Nevertheless, RGM has forecast an improved growth of 4.6% for 2020 representing RM112.4 billion in sales value.

Source: BIMB Securities Research - 13 Jan 2020