Tan: At this moment, no country in the world is able to control the rise of inflation. (Photo by Sam Fong/The Edge)

PETALING JAYA (May 18): Retail Group Malaysia (RGM) managing director Tan Hai Hsin said on Wednesday (May 18) there is no direct answer on the impact of the ringgit weakening against the US dollar because the current inflation scenario is “unique” at a time when rising consumer prices are due to the increase in raw material, import and transportation costs.

“The problem today is not just happening in Malaysia, but also in Singapore, Taiwan, Thailand, [the] United States, Europe, and around the world. How can we stop inflation?

"At this moment, no country in the world is able to control the rise of inflation.

“Traditionally, prices went up because of demand, but prices now do not go up because of demand. It is because of the cost increase from raw materials, import and transportation costs. That is very unique,” Tan laments as he fielded reporters’ questions at RGM’s briefing here on the rejuvenation of Malaysia's retail sector post Covid-19 pandemic.

Elaborating on RGM’s view that the current rise in consumer prices is not demand-led, he said RGM, which conducts research on the Malaysian retail sector, does not perceive the current rise in the country’s retail sales as due to revenge spending post pandemic because consumers are returning to their normal spending patterns.

According to him, RGM defines the phrase revenge spending as "buying everything you have not bought in the past".

“Media has said that it is revenge spending, but we have to define revenge spending, which is buying everything you have not bought in the past. We are not experiencing [the situation] that way, people are back to normal spending.

“For example, in the food and beverage line, eating has its capacity and you cannot make up for what you have missed previously.

“And for the retail side, if you have missed [purchasing gifts] for the past two Christmases, will you buy three [gifts] at once?” Tan said.

At the time of writing on Wednesday, the ringgit weakened to 4.3955 against the US dollar as the greenback strengthened in anticipation of US interest rate hikes to fight inflation.

The exchange rate was between 4.3850 and 4.3955 so far on Wednesday.

Over the last one year, the ringgit was traded at between 4.1070 and 4.3987 against the US dollar.

Last Friday, Bank Negara Malaysia (BNM) said in a statement in conjunction with the central bank’s announcement on Malaysia’s economic performance for the first quarter of 2022 that for 2022, in an environment of high input costs and improving demand, the country’s headline inflation as measured by the consumer price index is projected to average between 2.2% and 3.2%.

"Underlying inflation, as measured by core inflation, is also expected to trend higher during the year, averaging between 2% [and] 3%. Several key factors are expected to partly contain upward pressure on prices, namely the existing price control measures and the continued spare capacity in the economy.

"Nonetheless, the inflation outlook remains subject to commodity price developments, arising mainly from the military conflict in Ukraine and prolonged supply-related disruptions. The outlook is also contingent on domestic policy measures on administered prices,” BNM said.

Globally, major economies such as the UK and the US have reported substantial inflation compared with a year earlier.

CNBC, quoting the UK's Office for National Statistics, reported on Wednesday (May 18) that the UK's inflation soared to a 40-year high of 9% in April 2022 from a year earlier as food and energy prices spiralled.

"The 9% rise in the consumer price index is the highest since records began in their current form in 1989, outstripping the 8.4% annual rise posted in March 1992 and well ahead of the 7% seen in March of this year (2022)," CNBC reported.

On May 11, 2022, it was reported that the US' consumer prices grew 8.3% year-on-year (y-o-y) in April 2022 compared with the 8.5% y-o-y rise in March 2022.

"Consumer prices jumped 8.3% last month (April 2022) from 12 months earlier, the US Department of Labor said on Wednesday (May 11, 2022). That was below the 8.5% y-o-y surge in March [2022], which was the highest rate since 1981," AP reported.

At the RGM press conference on Wednesday (May 18, 2022), Tan said the weaker ringgit against the US dollar has not affected the rate of consumer spending yet.

"Retailers are enjoying better sales. Some retailers even have better sales than before the Covid-19 pandemic [which began in early 2020].

"The trend says it is good now. My only concern is how long will it last?" he said.

According to RGM's March 2022 report on the Malaysian retail sector, RGM had revised upward its 2022 Malaysia retail sales growth forecast to 6.3% from the 6% growth projection made in November 2021.

Malaysia's retail industry sales contracted 16.3% and 2.3% in 2020 and 2021, respectively, according to RGM.