• Distributive trade sales contracted for the third straight month, but at a slower pace in December (-0.3% YoY; Nov: - 1.2%) as some of the COVID-19 restrictions have been loosened in December
  • MoM (4.6%; Nov: -0.1%): best monthly gain in five months as demand recovery gains some momentum following the government’s decision to lift the Conditional Movement Control Order (CMCO) on 7th Dec.
  • 4Q20 (-0.7%; 3Q20: -1.8%): contraction moderated, attributable to higher December sales (RM115.5b; November: 110.4b) which recorded second-highest ever.
  • 2020 (-5.9%; 2019: 5.9%): biggest annual contraction on record.
     
• The improved performance was broad-based, driven by the sales of motor vehicles, retail and wholesale trade
  • Motor vehicles (7.8%; Nov: 1.2%): rose to a three-month high on better growth in sales of motor vehicles (15.3%; Nov: 7.1%) due to the anticipated end to the SST exemption, which was eventually extended until June 2021.
  • Wholesale trade (-0.6%; Nov: -0.7%): marked a marginally softer fall due to a lesser decline in sales of other specialised items (-6.4%; Nov: -6.8%).
  • Retail trade (-2.0%; Nov: -2.3%): smaller drop on narrowed contraction in sales of household (-4.1%; Nov: -4.4%) equipment.
     
• Weaker retail trade performance across advanced and developing economies
  • SG: contraction worsened to -3.6% (Nov: -1.7%), a two-month low due to lower sales in cosmetics, toiletries and medical goods.
  • CN: slowed (Dec: 4.6%; Nov: 5.0%) for the first time since steadily recovering from March’s meltdown, partly due to a slow recovery in the catering and restaurant industries.
     
• 2021 distributive trade sales will likely rebound to 8.0-10.0% due to the expectation of a return to partial normalcy in 2H21, unleashing some pent-up demand
  • The implementation of MCO 2.0 from 13th Jan until 18th Feb 2021 is expected to drag retail sales down in the 1Q21. However, Malaysia’s COVID-19 immunisation programme which is expected to begin at the end of February may unleash some pent-up demand and kick start the economy as we gradually return to a semblance of normalcy in the 2H21.
  • Against this backdrop, private consumption is expected to weaken to -1.1% in 1Q21 (4Q20F: 1.5%) before rebounding to 9.9% in the 2Q21. Consequently, 2021 GDP growth is expected to settle at 3.9% (2020F: -5.3%).

Source: Kenanga Research - 10 Feb 2021