Photo by Shahrin Yahya/The Edge

KUALA LUMPUR (June 18): Malaysia’s retail sales rebounded in the first quarter of this year (1Q2024), thanks mainly to the Chinese New Year festival and month-long school holiday, though growth may slow in the next three months, according to Retail Group Malaysia (RGM).

Retail sales grew 7.8% in January-March 2024 when compared to the same period in 2023, as most subsectors notched a turnaround led by fashion and department store-cum-supermarket, the independent retail research firm said in a statement. In the October-December period, retail sales declined 0.2% year-on-year (y-o-y).

Festive sales during Hari Raya Aidilfitri, which began from the second week of April, were “not encouraging and below market expectations”, RGM said. Members of the Malaysia Retailers Association and the Malaysia Retail Chain Association projected an average growth of 1.7% during 2Q2024, it noted.

Unemployment in Malaysia averaged 3.3% in 1Q2024, near the 3% level economists consider to be full employment. The labour force participation rate — an estimate of the number of people in the workforce as a percentage of the total working-age population — was at a historical high of 70.2%.

Consumers, however, were putting spending plans on hold, as sentiment slipped in 1Q2024, amid concerns over rising cost of living and subdued jobs prospects, according to the Malaysian Institute of Economic Research.

Sales at department stores cum supermarkets grew 12.3% in 1Q2024, while fashion and accessories were up 12.6%. The subsector which includes furniture and furnishing, home improvement as well as electrical and electronics, however, contracted 2.1%.

For the full year of 2024, RGM cut its estimate for retail sales growth to 3.6% from the 4.0% forecast in March to largely account for a weaker second quarter, and flagged continued concerns over rising cost of living as the biggest challenge for Malaysia's retail industry.

“A weak Malaysian currency since last year continues to put great pressure on companies selling imported retail goods as well as companies importing raw materials and semi-finished goods,” RGM said. “Many of them have passed the higher costs to end consumers.”

RGM, which also covers the food and beverage sector, said that the cafe-and-restaurant subsector grew 7.4% y-o-y in 1Q2024, while the take-away, kiosk and stall group was up 9.7%, thanks to the holiday season.

“Cafe and restaurant operators are hopeful that their business will retain the growth momentum in the next quarter”, and sales may expand by 7.3% during 2Q2024, RGM said. However, kiosk and stall operators are projecting a slowdown in sales to 5.5% in the quarter, the group added.