● Distributive trade sales contracted for the fifth consecutive month in July (-3.5% YoY), but better than June’s - 8.4%

- Overall sales value improved further in July (RM108.6b; Jun: RM102.9b) to the level last seen before the implementation of Movement Control Order (MCO) as July was the first full month in which non-essential businesses and shops were allowed to reopen.

- MoM: softer growth (5.6%; Jun: 21.8%) after it rebounded sharply in the preceding two months.

● The improved performance was broad-based, propelled mainly by the sales of motor vehicles and retail trade

- Motor vehicles: returned to positive growth of 1.7% in July (Jun: -4.5%), driven by higher sales of motor vehicles (5.8%; Jun: 0.2%) on the back of sales tax holiday and pent up demand.

- Retail trade: dropped by less (-3.8%; Jun: -9.2%) primarily on a MoM improvement in sales at non-specialised stores and others in specialised store.

- Wholesale trade: softer fall (-4.5%; Jun: -8.7%) due to a smaller contraction in sales of other specialised items.

● Mixed retail trade performance across advanced and developing economies

- US: moderated in July (1.2%; Jun: 8.4%) as consumers cut back on purchases of motor vehicles amid the resurgence of COVID-19 infections.

- SG: contraction eased further (-8.5%; Jun: -27.7%) due to higher sales recorded in supermarkets and telecommunication equipment stores.

● 2020 distributive trade sales forecast retained at -2.5% to -1.5% (2019: 5.9%) on signs of slow economic recovery

- We expect the months ahead to reveal a continued improvement in distributive trade sales on the back of falling unemployment rate and improving consumer sentiment. However, the recovery will be slow and gradual as the government has extended the Recovery MCO period until end-2020.

- As such, private consumption growth is projected to register a softer contraction in 3Q20 (-7.0%; 2Q20: -18.5%), dragging the 3Q20 GDP to a forecast growth of -6.2% (2Q20: -17.1%).

Source: Kenanga Research - 14 Sept 2020