● Distributive trade sales rebounded to 5.4% YoY in October (Sep: -2.6%) after four consecutive months of contraction as the government allowed most of the social and economic sectors to reopen on October 11

- Sales value (RM116.4b; Sep: RM108.1b): hit a record high due to a release of post-lockdown pent-up demand. On a MoM basis, sales expanded for the fourth straight month (7.7%; Sep: 8.1%), increasing by more than 8.2b from September.

● The improved performance was broad-based, steered primarily by the sales of motor vehicles

- Motor vehicles (10.2%; Sep: -20.9%): rebounded to a five-month high, driven by a double-digit growth in the sales of motor vehicles (25.5%; Sep: -18.1%) despite the ongoing global chip shortage.

- Wholesale trade (4.4%; Sep: 0.9%): highest growth recorded since May 2021, mainly due to higher sales of food, beverages and tobacco products (10.6%; Sep: 6.3%) as wholesalers increased their inventories in anticipation of a strong retail demand.

- Retail trade (5.1%; Sep: -1.1%): returned to positive growth after four straight months of decline due to higher sales at non-specialised stores (8.2%; Sep: 0.3%) and sales of automotive fuel (17.8%; Sep: 5.3%).

● Increased retail trade performance across advanced and developing economies

- US: rose to 17.6% (Sep: 15.7%), mainly boosted by early Christmas shopping as Americans are trying to avoid empty shelves amid the shortages of goods due to the COVID-19 pandemic. To add, the increase in sales partly reflected higher prices as US CPI increased by 6.2% in October.

- JP: rebounded to 0.9% (Sep: -0.5%) as Japan has fully dropped its COVID-19 state of emergency on October 1.

- CN: climbed for the second straight month in October (4.9%; Sep: 4.4%), mainly due to China's golden week holiday shopping spree. This was well above the Reuters consensus estimates of 3.5%.

● 2021 distributive trade sales forecast maintained at 7.0%-9.0% (2020: -5.9%) despite renewed COVID-19 fears

- Despite the emergence of the new Omicron variant, we expect that sales value may continue to increase in the next few months due to a potential rise in consumer spending as evidenced by the google mobility data. To note, supermarket and pharmacy store visits in Malaysia were around 18.0% above the pre-pandemic level in the week to December 6 (mid-Oct: 12.9%), while retail and recreation visits were around -11.0% (mid-Oct: -22.1%).

- Thus, value-added private consumption growth is projected to rebound sharply by 9.5% in the 4Q21 (3Q21: -4.2%), bringing the 4Q21 GDP to potentially settle around the 4.0%-6.0% range (3Q21: -4.5%).

Source: Kenanga Research - 13 Dec 2021