● Distributive trade sales fell sharply in June (-10.3%; May: 28.2%), despite a relatively low base in June 2020, due to the imposition of tighter COVID-19 restrictions under the Full Movement Control Under (FMCO) throughout the month

• Sales value (RM92.2b; May: RM108.2b): dipped below the RM100.0b mark for the first time since May 2020. Consequently, the monthly trade sales decreased sharply by 14.8% (May: -2.6%).
• 2Q21 (22.6%; 1Q21: 1.7%): recorded a double-digit expansion, mainly due to 2Q20’s low base.

● The sharp decline in sales value was driven mainly by an almost non-existent motor vehicle purchase

• Motor vehicles (-92.4%; May: 71.1%): dived sharply as all car dealerships were closed during the period of FMCO, almost matching the record low of -93.2% seen in April 2020.
• Retail trade (-2.9%; May: 17.3%): declined on weak sales at non-specialised stores (-7.2%; May: 4.0%) as non essential shops were not allowed to operate.
• Wholesale trade (3.6%; May: 30.9%): slowed significantly due to a sharp contraction in sales of household goods (-9.2%; May: 14.3%).

● Retail trade performance eased across advanced economies

• US: eased to the lowest in four months (17.6%; May: 26.0%), but unexpectedly rose by 0.6% MoM (May: -1.7%) as consumers increased spending at restaurants and bars amid a strong economic reopening.
• SG: moderated to 25.8% from May’s 79.9%, mainly due to the dissipation of the base effects. However, MoM seasonally adjusted sales growth rebounded to 1.8% (May: -6.8%) despite the implementation of COVID-19 curbs.
• JP: slowed sharply to 0.1% (May: 8.3%), slightly lower than a median market forecast of 0.2%, as consumption weakened amid rising concern over the spread of the COVID-19 infections in Japan.

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

• Even though Malaysia key economic states are still stuck in Phase 1 of the National Recovery Plan (NRP), we expect that sales activity may gradually pick up in 3Q21 as more states transit into Phase 2 and 3 of the NRP. To add, the loosening of social restrictions for fully-vaccinated individuals in states under Phase 2 and above may help to boost retail sales.
• In line with the double-digit growth in the distributive trade sales in 2Q21, along with the base effect, private consumption growth is expected to rebound to 13.3% in the 2Q21 (1Q21: -1.5%)

Source: Kenanga Research - 12 Aug 2021