● Distributive trade sales softened in May (28.3%; Apr: 66.2%) due to weak consumer spending as most economic activities were halted during the Movement Control Order (MCO) 3.0 period

• Sales value (RM108.3b; Apr: RM111.1b): marginally below the pre-pandemic level (Feb-20: RM109.0b) as monthly trade sales declined further to 2.5% (Apr: -1.5%) due to the implementation of a nationwide MCO in May.

● The weak sales performance was driven by a declining motor vehicle sales and retail trade on a monthly basis

• Motor vehicles (71.1%; Apr: 1,551.3%): moderated sharply due to the implementation of MCO 3.0 and the ongoing global chip shortage.
• Retail trade (17.3%; Apr: 56.4%): decelerated significantly due to a weak sale at non-specialised stores (4.0%; Apr: 22.0%) and other goods in specialised stores (24.5%; Apr: 133.5%).
• Wholesale trade (31.2%; Apr: 40.5%): slowed slightly from the record high posted in April, but monthly sales climbed to 0.8% (Apr: 0.4%) on higher sales of food, beverages and tobacco as retailers stockpiled essential items.

● Retail trade performance across advanced and developing economies remained mixed

• US: fell to 26.4% from last month’s record high of 42.7% as consumer spending has mainly shifted toward services, while spending on goods moderated as the US economy reopens.
• SG: climbed sharply to 79.7% (Apr: 54.0%) due to the low base of last year. However, MoM seasonally adjusted sales growth fell further (-6.8%; Apr: -1.3%) amid the implementation of Phase 2 measures.
• CN: slowed (12.4%; Apr: 17.7%) for the second straight month, despite government efforts to boost spending and May Day holidays.

● 2021 distributive trade sales forecast maintained at 6.0%-8.0% (2020: -5.9%)

• The unabated rise in new COVID-19 infections has led to the prolongation of the full-scale MCO beyond June and the imposition of the enhanced MCO in a number of localities in Malaysia, until at least July 16. In the near term, this is expected to hamper an already sluggish consumer spending and impede the domestic economy's recovery. Nevertheless, the retail industry now has some breathing space as more states were allowed to transit into the second phase of the national recovery plan, partly due to the country's swift vaccine rollout.
• Coupled with the base effect, private consumption growth is projected to rebound to 13.3% in the 2Q21 (1Q21: - 1.5%). Consequently, 2021 GDP growth is projected to settle at around 5.0-6.0% (2020: -5.6%).

Source: Kenanga Research - 13 Jul 2021