Distributive trade sales moderated to 5.4% YoY in January (Dec 19: 6.0%) despite peak festive season

• MoM: fell by 0.9% in January, sharpest drop in 4 months (Dec 19: 3.7%).

Broad-based moderation seen in all subcomponent led by motor vehicles

• Motor vehicles: eased to 6-month low (1.0%; Dec 19: 4.5%) attributable to normalisation effect of post-year-end promotional campaigns. On MoM, sales of motor vehicles continued to fall for two straight months albeit at a slower pace (-0.9%; Dec 19: -1.7%).
• Wholesale trade: slowed to 5.2% (Dec 19: 5.4%) on a bigger drop in sales of agriculture raw & live animals, as well as food, beverages & tobacco.
• Retail trade: moderated to 6.7% (Dec 19: 7.0%) weighed by slower sales in non-specialised store and others in a specialised store.

Retail trade performance eased across advanced economies

• US: retail trade sales moderated in January (4.1%; Dec 19: 6.0%) on slower sales at mainly clothing stores.
• UK: slight moderation (0.8%; Dec 19: 0.9%) attributable to slower growth in both food stores and non-food stores.

Distributive trade sales to soften further in 2020, potentially hitting our lower end forecast range of 4.0-6.0% (2019: 5.9%)

• The escalating COVID-19 outbreak will weigh on consumer and business confidence, subsequently disrupting the overall retail industry in the 1H20 and the Visit Malaysia Campaign 2020. Combined with the travel banned imposed in many countries and supply chain disruption in the manufacturing sector, it clearly points towards a bearish outlook going forward.
• Therefore, private consumption is expected to ease to 6.0% in 1Q20 (4Q19: 8.1%) dragging the 1Q20 GDP growth to slow to 2.1% (4Q19: 3.6%).

Source: Kenanga Research - 16 Mar 2020