● Distributive trade sales contracted for the second consecutive month in November (-1.2% YoY; Oct: -0.8%)

- Sales value (RM110.4b; Oct: RM110.5b): fell to its lowest level in four months.

- MoM (-0.1%; Oct: -0.5%): declined for the third straight month, albeit at a softer pace, as consumer spending remained weak following the reinstatement of COVID-19 restriction measures.

● The decline was driven by a further decline in retail trade and weakening motor vehicle sales, but was partially lifted by a softer fall in wholesale trade

- Retail trade (-2.3%; Oct: -1.5%): contraction deepened due to the declining sales of automotive fuels (-14.6%; Oct: -9.6%) amid the inter-state travel ban and a moderation in sales of non-specialised stores (2.3%; Oct: 4.4%).

- Motor vehicles (1.2%; Oct: 2.2%): attributed to a steeper fall in sales of parts & accessories (-7.7%; Oct: -4.5%), and maintenance & repair (-9.5%; Oct: -4.3%)

- Wholesale trade (-0.7%; Oct: -0.9%): contraction softened to its smallest in 9 months, driven by a rise in sales of food, beverages, and tobacco (4.7%; Oct: 3.8%).

● Weaker retail trade performance across most advanced and developing economies

- ID: fell to -16.3% (Oct: -14.9%), reaching its lowest level in five months.

- EA: fell to its lowest in six months (-3.20%; Oct: 3.86%), driven by the reinstatement of COVID-19 containment measures across the continent.

● 2020 distributive trade sales will likely fall slightly below our forecast range -5.5% to -4.5% (YTD: -6.4%; 2019: 5.9%), as COVID-19 restrictions continue to impact consumer spending

- The continuing surge of COVID-19 infections has led to the reinstatement of full Movement Control Orders (MCO) across several key states, until at least 26th January. In the near term, this is expected to stifle an already struggling recovery in consumer spending, despite the trade sector being allowed to operate over this period.

- Nevertheless, private consumption growth is projected to recover on annual basis amid expectation of a wider vaccine rollout and further distribution of fiscal stimulus, in line with a forecasted recovery in 2021 GDP growth, albeit an adjusted 3.9% from 6.1% earlier (2020F: -5.1%).

Source: Kenanga Research - 13 Jan 2021