• Distributive trade sales eased to 13.8% YoY in December

• Growth in all wholesale and retail sub-sectors

• Global retail sales ended 2022 on a weak note, however

• Revival of tourism activity is set to support Malaysia’s retail trade spending

Malaysia’s wholesale & retail trade sales grew 13.8% YoY and reached the highest monthly sales value amounting to RM137.3bn in December, mainly boosted by growth in the retail trade and motor vehicle sub-sector. Growth in distributive trade continued on double-digit expansion rate for 9-consecutive months albeit at  a slower pace.

Retail trade eased slightly to 22.7% but generated higher sales value of RM59.5bn in  December. It was the slowest growth since April, as sales slowed down in both retail sales in specialised stores (Dec: 30.7%; Nov: 32.8%) and other household equipment  (Dec: 12.6%; Nov: 14.8%). Other groups in this sub-sector also recorded positive growths namely retail sales not in stores, stalls or market (11.4%) and retail sales in stalls & market (17.8%). Meanwhile, wholesale trade grew 4.7% YoY to RM60.3bn.  This increase was attributed to wholesale of household goods (7.6%) and wholesale of agricultural raw materials & live animals (18.2%). Sales value of motor vehicles sub-sector jumped 20.3% YoY to RM17.5bn. The increase was attributed to sales of motor vehicles which elevated 24.8%. This was followed by sales of motor vehicles parts & accessories and maintenance & repair of motor vehicles with 27.3% and  30.9%, respectively.

Meanwhile, performance in online retail sales increased with online retail sales index, which portrays e-commerce activity online sales recorded 10.2% YoY growth  (Nov: 9.3%; Oct 17.3%). For seasonally adjusted value, the index rose 2.9% MoM  (Nov: -6.0%; Oct: 2.6%). Meanwhile, the fourth quarter increased 12.2% YoY, while the index rose 19.0% annually.

On a monthly basis, the sales value of wholesale & retail trade rose 2.3% in December, mainly supported by Motor Vehicles which grew 9.3%. Retail trade and wholesale trade increased by 1.2% and 1.4%, respectively.

Total sales in 2022 surpassed pre-pandemic value. Sales value for Wholesale & Retail Trade recorded RM405.2bn for 4Q022 with a positive growth of 14.3% YoY, underpinned by Retail Trade sub-sector which expanded RM33.9bn or 23.8% to RM176.5bn. Wholesale Trade and  Motor Vehicles activities increase to register a growth of 5.9% (+RM10.0bn), and 16.3% (+RM6.9bn), respectively. Quarter-on-quarter comparison, this sub-sector went up 1.8%. Wholesale & Retail ended 2022 with 19.6% increased, compared to 4.0% in 2021,  accumulating the total sales to RM1.6tn, underpinned by Retail Trade which increased  RM127.5bn or 23.9% to settle at RM661.1bn. This was followed by Wholesale Trade which expanded with 10.7% to RM710.3bn. Motor Vehicles sub-sector also recorded higher sales than 2021, increased 47.6% to RM183.2bn. As for pre-pandemic comparison, sales of  Wholesale & Retail Trade in 2022 surpassed those recorded in 2019 by RM228.1bn or growth of 17.2% (2019: RM1.3tn).

Global retail sales ended 2022 on a weak note

Households were cost-conscious at the end of 2022, with December’s global retail sales data showed that the sector ended 2022 on a weak note. The weakened demand during the fourth quarter came as inflation declined but remained elevated. The pace of spending was choppy, and consumers may have pulled back on their spending.

Consumer spending momentum in the US and Europe moderated further on the back of elevated inflationary pressure and tightening monetary policy. US retail sales fell by the most in a year in December, putting consumer spending and the overall economy on a  weaker growth path heading into 2023. Retail sales plummeted 1.1% MoM, the biggest drop since December 2021. Retail sales rose 6.0% YoY in December. Eurozone retail sales fell in December, underlining the weakness in consumer demand at the end of the year amid high inflation. Retail sales in December fell 2.7% MoM for a 2.8% YoY decline. UK  retail sales fell 1.0% MoM in December, adding to signs that the costs of living crisis has squeezed consumer spending power. Retail sales decreased 6.1% YoY in December and marks the ninth straight month of declines in retail sales.

Across the globe, retail sales in Japan rose 3.8% YoY in December following a 2.5% gain in  November, as domestic consumption continued to recover from the pandemic slump. China’s retail sales decline narrowed sharply to -1.8% YoY in December, the third straight month of contraction. The momentum has remained negative with retail sales falling - 0.14% MoM. Overall, reflecting the slump in private consumption, retail sales contracted by -0.2% in 2022, the worst since -3.9% in 2020. However, we foresee strong rebound in  China’s domestic trade activities as the government have remove and relax most of restrictive measures including the reopening of international borders. Singapore’s retail sales rebounded to end 2022 on a positive note, expanding 1.3% MoM, 7.4% YoY in  December compared to November’s -3.6% MoM, 6.5% YoY. This was the second consecutive single-digit YoY growth after seven consecutive months of double-digit growth.

Outlook

For 2022, Wholesale & Retail recorded a 19.6% YoY increase, underpinned by Retail Trade which increased 23.9%. We continue to expect domestic retailers to enjoy domestic and external support as Malaysia’s consumer spending is expanding strongly, while the tight domestic labour market will also contribute to domestic consumption demand. Going into  2023, one of the key downside risks to retail sales is the still-elevated inflation pressures and rising cost of living that may increasingly curb discretionary spending of households.

That said, upside growth factors for retail sales could be attributed to the continued recovery in leisure and business air travel and inbound tourism, which will benefit many in-person services sectors, and the impact of China’s border reopening is likely to be positive for Malaysia’s travel and tourism-related sectors including retail. The boost to these sectors could be significant because prior to the COVID-19 pandemic, China was  Malaysia’s one of the top sources of inbound tourists and the biggest contributor to tourism receipts. Based on Tourism Malaysia data, in 2019, about 3.1mn (11.9% share)  Chinese tourists visited Malaysia, making China our third-largest source market for international arrivals after Singapore and Indonesia. Tourism receipts from Chinese tourists totalled RM15.3bn, or 17.8% of Malaysia's total tourist receipts in 2019.

Malaysian Association of Tour and Travel Agents (Matta) estimated that about 1.2mn  Chinese tourists will visit Malaysia this year. Their arrivals are expected to generate approximately RM3.6bn in tourism receipts. Meanwhile, Malaysia’s Ministry of Tourism,  Arts and Culture said that Malaysia is working to get 5mn Chinese tourists to visit the country this year - a 60% increase compared to what it received in 2019 before the Covid-19 pandemic struck. Overall, the ministry is targeting 15.6mn tourist arrivals with  RM47.6bn in tourism receipts this year. Hence, the boost to retail sales could therefore be significant.

Source: BIMB Securities Research - 9 Feb 2023