• Distributive trade sales grew 6.5% YoY in October

• All sub-sectors recorded positive growth

• Global retail sales remained sluggish

• Upbeat momentum in consumer demand will be the key driver to growth

Malaysia’s Wholesale & Retail Trade recorded sales value of RM142.3bn, increased 6.5% YoY in October 2023. Growth was across the board.

By sub-sectors, retail trade expanded by registering 3.9% YoY or RM2.3bn to RM60.6bn. Growth was supported by Retail Sale of Food, Beverages & Tobacco in Specialised Stores (Oct: 10.8%; Sep: 13.4%), Retail Sale in Non-specialised Stores (Oct: 6.1%; Sep: 8.9%), Retail Sale Via Stalls & Markets (Oct: 5.2%; Sep: 5.4), and Retail Sale of Automotive Fuel in Specialised Stores (Oct: 4.8%; Sep: 5.5%). Wholesale trade sub-sector rose 5.7% YoY or RM3.4bn to register RM63.3bn. This increase was contributed by Wholesale of Agricultural Raw Materials & Live Animals (Oct: 8.9%; Sep: 9.9%), Other Specialised Wholesale (Oct: 7.5%; Sep: 8.6%), and Non-specialised Wholesale Trade (Oct: 5.7%; Sep: 6.6%). Sales value of motor vehicles recorded a double-digit growth of 19.1% YoY or RM3.0bn to settle at RM18.4bn. The increase was attributed to Sale of Motor Vehicles which surged 24.6% YoY October (Sep: 3.8%). This was followed by maintenance & repair of motor vehicles (Oct: 17.7%; Sep: 18.6%). The sales of motor vehicles have registered strong growth in October 2023, with a total industry volume (TIV) of 74,896 units sold. This represents an increase of 10.0% from the 68,156 units sold in September 2023. This marked the second highest monthly TIV for the whole year on record and it was also the third time this year the monthly TIV exceeded the 70,000 marks. As of now, the highest monthly TIV achieved was in March 2023 at 78,849 units

On a monthly basis, sales value of wholesale & retail trade sales value fell marginally -0.3%. Both retail trade and wholesale trade edge down by -0.8% and -1.4%, respectively. Meanwhile, sales of motor vehicles sub-sector recorded a positive growth of 5.2%.

Global retail sales remained sluggish

Global retail sales growth remained sluggish, as the ongoing cost-of-living squeeze prompted shoppers to rein in spending on non-essential items. The cost-of-living crisis has taken its toll on consumer spending for many households, and the continued economic conditions are testing consumer resilience. Overall household consumption is likely to remain under pressure, at least at the start of 2024.

UK retail sales have hit their lowest level since February 2021, as retail sales fell by 0.3% MoM in October, following an upwardly revised 1.1% decrease in September. On a yearly basis, retail sales fell by 2.7%, marking the 19th consecutive month of decline. Households in UK continue to prioritise essential spending, particularly as falling winter temperatures push energy use up. Automotive fuel sales fell by 2.0%, as consumers were spending their money more cautiously, alongside the impact of bad weather. Retail sales in the Euro Area rose by 0.1% MoM in October. The slight increase follows three consecutive months of decline in the Eurozone and the awakening optimism may be muffled by the annual figure which suggests that retail sales decreased by 1.2% YoY in October, the third consecutive month of contraction. Consumer demand remained subdued due to high inflation and pricy borrowing costs. US retail sales fell for the first time in seven months in October, pointing to slowing demand at the start of the fourth quarter that further strengthened expectations the Federal Reserve is done hiking interest rates though the decline was partly driven by falling prices for both gasoline and cars. Retail sales decreased by 0.1% MoM in October, while data for September was revised higher to show sales increasing 0.9% instead of the previously reported 0.7% rise. Excluding sales of gas and autos, retail sales ticked up 0.1% MoM. And excluding sales of autos, gas, building materials, and restaurant meals, the so-called “control group” of sales — which is used to calculate economic growth — rose 0.2% MoM, after a 0.7% leap in September. The increase in control sales suggests consumers still have some spending power left. On a yearly basis, retail trade growth slowed to 2.5% in October from an upwardly revised 4.1% in September.

Meanwhile, retail sales across Asian economies were mixed. Retail sales in Indonesia increased by 1.8% YoY in Octobe, accelerating from a 1.5% gain in the previous month. It was the fifth straight month of rise in retail turnover and the strongest pace since June. Retail sales in Japan rose 4.2% YoY, slowing for the second consecutive month following a revised 6.2% gain in September. October’s figure was also the lowest reading in ten months but still, it was the 20th consecutive month of expansion in retail sales as consumption continued to recover. On a monthly basis, retail sales declined by 1.6% in October, accelerating from a 0.1% fall in September. Singapore’s retail sales contracted by -0.1% YoY, and below September’s upwardly revised reading of 0.8%. This is the first year-onyear fall since January 2023. Excluding motor vehicle sales, retail sales fared worse as it contracted by a larger -1.3% MoM in October (Sep: -0.9%), translating to a annual contraction of -1.0% (Sep: +0.7%).

Outlook

Malaysia's distributive trade remained strong with positive growth in October. A year-on-year increase of 6.5% is a significant indicator of economic resilience and consumer confidence. Retail trade posted growth of 3.9% YoY in October, slightly lower than the 5.9% pace recorded in the previous month and on monthly basis, after four consecutive months of growth, retail sales reverted back to negative growth of 0.8%. Reflecting a slower retail trade, the performance in online retail sales went down -0.3% YoY in October (Sep: 2.0%; Aug: 1.0% Jul: 0.4%; Jun: 1.5%; May: -0.8%; Apr: 4.1%; Mar: 11.7%; Feb: 9.4%). For seasonally adjusted value, the index declined -1.5% MoM.

The resilient of consumer demand in Malaysia is in tandem with the healthy job market development and softening inflationary pressure. Looking ahead, we foresee sanguine domestic outlook for 2024 amid better pick-up in tourism activities. Tourist arrivals will continue to increase following the implementation of the 30-day visa exemption for travellers from China and India from December 1. The tourism sector is projected to pick up significantly next year, with tourism arrivals in 2024 is projected to be more than the 26.1mn foreign visitors seen in 2019. The anticipation of higher tourist arrivals in 2024 will help Malaysia’s domestic-oriented activities and will continue to be supportive of domestic spending. Looking ahead, domestic demand is likely to remain the main anchor of growth and will cushion a persistent drag from the external sector. The services sector continued to show resilience as tourism and consumer related sectors are supported by returning tourists and favorable labor market conditions. The retail sector is expected to continue to benefit from these favorable conditions which will further bolster its performance in the coming months.

Source: BIMB Securities Research - 11 Dec 2023