• Distributive trade sales grew 6.7% YoY in August

• Growth recorded in all sub-sectors

• Slump in global retail sales eases in August

• Consumer demand remained firm and resilient

Malaysia’s wholesale & retail trade expanded 6.7% YoY in August as sales value surged to a record high of RM142.5bn. Growth was across the board.

By sub-sectors, retail trade registered a growth of 6.3% YoY or RM3.6bn to RM60.5bn to reach new record high. Growth was supported by retail sales in non-specialised stores (Aug: 9.2%; Jul: 9.0%) to RM23.0bn. Other groups in this sub-sector also recorded positive growth namely retail sale of food, beverages & tobacco in specialised stores (Aug: 13.3%; Jul: 12.5%) and retail sale in non-specialised stores (9.2%). Wholesale Trade sub-sector growth expanded 6.2% YoY or RM3.7bn to register RM63.9bn. This increase was attributed to wholesale on a fee or contract basis (Aug: 10.3%; Jul: 10.5%), wholesale of food, beverages & tobacco (Aug: 8.1%; Jul: 8.8%) and wholesale of agricultural raw materials & live animals (7.9%). Sales value of motor vehicles increased 9.7% or RM1.6bn to settle at RM18.1bn. The increased was fuelled by sales of motor vehicles parts & accessories which accelerated 20.7% (Jul: 17.3%) or RM0.8bn to record RM4.7bn. This was followed by sales of motor vehicles (Aug: 6.2%; Jul: 25.9%) and maintenance & repair of motor vehicles (21.6%). A total of 71,745 vehicles were delivered to buyers in August, 8,069 units more than the 63,676 units in July, representing a 12.7% MoM increase in volume. Compared to the same month in 2022, August’s total was 6.1% or 4,136 units higher than the 67,609 units achieved last year.

On a monthly basis, sales value of wholesale & retail trade expanded for the fourth straight month and at the fastest pace in six months as sales value grew 2.0% or RM2.8bn. This monthly growth was contributed by motor vehicles with an increase of RM1.2bn or 7.1%. Within the same period, retail trade recorded a positive growth of 1.4% or RM0.9bn, while wholesale trade rose 1.2% or RM0.8bn.

Slump in global retail sales eases in August

The expansion in economic activity persisted in August as global retail sales saw a modest increase. While consumers are still spending, the composition of their spending continues to favour services over retail goods.

US retail spending remained robust while retail sales in the UK improved slightly amid the high cost of living continues to bear down on households. Retail sales in the US advanced 0.6% MoM and 2.5% YoY in August. The data continues to point to robust consumer spending despite high prices and borrowing costs. Retail sales in the UK fell by 1.4% YoY in August, easing from revised 3.1% decrease in July. This marked the 17th consecutive month of decline but represented the slowest pace of contraction in the current sequence. On the other hand, there was a further slowdown in Eurozone’s retail trade. Eurozone retail sales fell much more than expected in August, pointing to weaker consumer demand as inflation remains high. Retail sales in the Eurozone fell 1.2% MoM. On annual basis retail trade stayed in contractionary form for 11-straight months and declined 2.1% YoY in August.

Meanwhile, retail sales normalising across Asian economies. Retail sales growth in China came in at 4.6% YoY in Aug (Jul: 2.5%). Year-to-date, retail sales rose 7.0% YoY with most of the gains due to the initial pent-up demand after borders reopened and the low base of comparison last year. Retail sales in Japan increased 7.0% YoY in August, unchanged from an upwardly revised figure in the previous month. It was the 18th consecutive month of expansion in retail sales and the fastest pace since February as consumption continued to recover. Singapore’s retail sales rose 4.0% YoY, higher than July’s revised reading of 1.3% YoY while Indonesia’s retail trade grew for the third straight month as the sales climbed by 1.1% YoY in August

Outlook

Malaysia's distributive trade experienced such positive growth and achieved record-high sales in August. A year-on-year increase of 6.7% is a significant indicator of economic resilience and consumer confidence. Retail trade, in particular, saw a robust growth of 6.3% YoY, contributing to the overall positive performance. YTD distributive sales growth remained resilient, growing by 7.9% to RM1.1tn. Reflecting a sustained retail trade, performance in online retail sales recorded 1.0% YoY growth in August (Jul: 0.4%; Jun: 1.5%; May: -0.8%; Apr: 4.1%; Mar: 11.7%; Feb: 9.4%). For seasonally adjusted value, the index went up 3.9% MoM.

The positive performance was primarily attributed to resilient domestic demand, backed by sustained expansion in the services sector fuelled by the gradual increase in tourist arrivals and steady labor market conditions as well as easing inflation. With prices rising at a more manageable pace, consumers may feel more confident in their purchasing power, potentially bolstering retail sales. Growth in retail trade highlights the strength of consumer demand and the resilience of the domestic retail industry. The economy is still healthy and moving forward, as long as employment growth holds up, consumers will still be willing to spend. It is expected that the retail sector will continue to benefit from the ongoing revival of inbound tourism and local consumption demand, further bolstering its performance in the coming months while further boosted by the upcoming festive season period and the year-end holiday sales.

Source: BIMB Securities Research - 13 Oct 2023