● Distributive trade sales expanded at the slowest pace in three months in December (3.5% YoY; Nov: 6.5%)

- Sales value (RM120.5b; Nov: RM117.6b): hit a new record high due to year-end shopping spree. On a MoM basis, sales increased for the second straight month (2.5%; Nov: 1.1%).

- 4Q21 (5.1%; 3Q21: -9.1%): rebounded sharply due to a sharp increase in October’s retail sales value.

- 2021 (4.0%; 2020: -5.8%): returned to positive growth due to the release of pent-up demand in 4Q21.

● Broad-based moderation seen in all sub-sector, led by motor vehicles

- Motor vehicles (1.5%; Nov: 4.6%): eased to a three-month low, attributable to a sharp drop in new car sales (-4.5%; Nov: 4.7%) due to global microchip shortage and Malaysia flash floods.

- Retail trade (3.5%; Nov: 6.7%): slowed due to lower sales at non-specialised stores (6.0%; Nov: 9.9%) and a continued drop in sales of others in specialised store (-3.1%; Nov: -1.0%).

- Wholesale trade (4.1%; Nov: 6.8%): softened on slower growth in sales of food, beverages and tobacco products (8.1%; Nov: 11.2%) and other specialised items (2.3%; Nov: 7.6%).

● Weak retail trade performance across advanced and developing economies as a resurgence in COVID-19 infections hurt consumer spending

- EU: weaker-than-expected at 6.5% (Nov: 12.1%) amid a record rise in the euro area inflation rate (5.0%; Nov: 4.9%) and rising COVID-19 infections.

- UK: slumped in December (-0.9%; Nov: 4.2%) as many people have already finished their Christmas shopping earlier in November and as the raging Omicron variant forced shoppers to stay at home.

- CN: slowed to 1.7% in December (Nov: 3.9%) as revenue in catering services fell by 2.2% amid renewed COVID- 19 flare-ups in certain part of China.

● Distributive trade sales may register a double-digit growth of 15.0% in 2022 despite the ongoing Omicron surge

- The current wave of Omicron dominant infections is expected to have minimal impact on Malaysia retail sales performance in 2022 as the government is unlikely to impose another round of stay-at-home orders. To add, the potential reopening of Malaysia’s international borders in March should help to boost the domestic retail industry.

- As such, private consumption growth is set to almost double to 6.4% in 2022 (2021F: 3.4%), in line with an expected improvement in the 2022 GDP growth (5.5%-6.0%; 2021F: 3.5%-4.0%).

Source: Kenanga Research - 10 Feb 2022