● Distributive trade sales fell in October (-0.8% YoY; Sep: 0.3%) amid weak consumer spending due to the reimplementation of Conditional Movement Control Order (CMCO)

− Sales value (RM110.5b; Sep: RM111.0b): lowest in three months

− MoM (-0.5%; Sep: -0.4%): continued to fall for the second straight month, reaching a six-month low as the pace of consumer spending has tapered off due to the renewed restrictions and COVID-19 resurgence.

● The decline was led by weakening retail trade and motor vehicle sales, but was partially capped by a softer contraction in wholesale trade

− Retail trade (-1.5%; Sep: 1.6%): returned to a growth contraction, due to declining sales of other goods in specialised stores (-7.4%; Sep: -1.2%) and a further fall in sales of automotive fuels (-9.6%; Sep: -7.1%).

− Wholesale trade (-0.9%; Sep: -4.2%): contraction softened to its smallest in 8 months, driven by a softer decline in sales of other specialised items (-6.1%; Sep: -14.2%).

− Motor vehicles (2.2%; Sep: 17.1%): growth fell significantly, due to declining motor vehicle sales (6.4%; Sep: 34.8%) and smaller growth in the sale, maintenance, and repair (4.7%; Sep: 9.4%).

● Increased retail trade performance across most advanced and developing economies

− Japan: rebounded sharply to 6.2% (Sep: -8.8%), up for the first time in eight months, partly due to a low base effect

− China: climbed to 4.3% (Sep: 3.3%), the third consecutive month of gains on the back of higher consumer spending due to the golden week holiday in October.

● 2020 distributive trade sales forecast revised lower to between -6.5% to -5.5% from -5.5% to -4.5% (YTD: -6.9%; 2019: 5.9%) as the pandemic showed no signs of slowing

− The resurgence of COVID-19 cases which has led to the reimplementation of CMCO and Enhanced MCO in highrisk areas in Malaysia is expected to dampen consumer spending in the near term. However, government attempt to mitigate the economic impacts of the COVID-19 pandemic by decreasing the CMCO stringency may partially help to cushion the impact on the retail sector.

− Nevertheless, private consumption growth is projected to rebound in 4Q20 (3.7%; 3Q20: -2.1%) due to the impact from the fiscal stimulus, with the 4Q20 GDP growth contraction expected to decelerate further to -1.7% (3Q20: - 2.7%).

Source: Kenanga Research - 11 Dec 2020