● Distributive trade sales fell for the fourth consecutive month, but at a much smaller contraction in September (- 2.6% YoY; Aug: -10.2%) as more COVID-19 measures were eased and as all states have moved out from the stringent phase 1 of the National Recovery Plan (NRP)

- Sales value (RM108.1b; Aug: RM100.0b): marginally below the pre-pandemic level (Feb-20: RM109.0b) but recorded its largest monthly gain (8.1%; Aug: 8.0%) since June 2020 as consumers released pent-up demand.

- 3Q21 (-9.1%; 2Q21: 22.6%): fell sharply due to the imposition of strict standard operating procedures in July.

● Broad-based sales improvement, propelled mainly by higher motor vehicles and retail trade sales value

- Motor vehicles (-20.9%; Aug: -57.6%): contraction softened further, attributable to improved sales of motor vehicles (-18.1%; Aug: -60.9%). To note, a total of 44,275 units were delivered in September (Aug: 17,500 units).

- Retail trade (-1.1%; Aug: -7.4%): dropped by less due to higher sales at non-specialised stores (0.3%; Aug: -8.1%) and sales of automotive fuel (5.3%; Aug: -6.2%).

- Wholesale trade (0.9%; Aug: -0.1%): bounced back into growth after two months of contraction, mainly due to an improvement in sales of household goods (-8.7%; Aug: -9.7%) and food, beverages and tobacco (6.3%; Aug: 3.4%).

● Mixed retail trade performance across advanced and developing economies

- US: slowed slightly to 15.6% (Aug: 16.5%), partly due to last year’s high base effect. On a MoM basis, retail sales unexpectedly rose by 0.8% despite the pervasive supply chain issues.

- SG: rebounded by 6.6% (Aug: -2.8%), driven by higher sales of mobile phones due to new product launches.

- CN: climbed to 4.4% (Aug: 2.5%), mainly due to an increase in e-commerce sales. To note, in the first three quarters of 2021, the total retail sales reached CNY31,805.7b, up by 16.4% YoY.

● 2021 distributive trade sales forecast revised up to 7.0%-9.0% from 6.0%-8.0% (2020: -5.9%) amid positive economic growth prospects

- Despite the implementation of various phases of movement control orders and the NRP, retail sales growth increased by 3.6% YoY in the Jan-Sep period. In 4Q21, buying activities are expected to pick up significantly due to the reopening of domestic economy, government measures and a potential further easing of the COVID-19 restrictions (e.g. international border reopening).

- In line with the drop in the 3Q21 sales value, value-added private consumption growth is projected to contract by 4.5% in the 3Q21 (2Q21: 11.6%), leading to a slight fall in the 3Q21 GDP (-1.4%; 2Q21: 16.1%).

Source: Kenanga Research - 11 Nov 2021