● Distributive trade sales increased at the fastest pace in 10 months in March (9.8% YoY; Feb: 8.4%), largely due to a jump in motor vehicle sales

- Sales value (RM123.8b; Feb: RM117.1b): hit a new record high due to a double-digit growth in motor vehicles monthly sales (33.9% MoM; Feb: -1.4%). To note, sales jumped to a five-month high of 5.7% MoM (Feb: -2.6%).

- 1Q22 (8.6%; 4Q21: 5.1%): grew at its fastest rate in three quarters, partly due to the low base effect.

● Broad-based improvement, propelled mainly by higher MoM motor vehicle sales

- Motor vehicles (11.1%; Feb: 11.6%): despite moderating on a YoY basis due to March 2021’s high base effect, a total of 73,222 vehicles were sold in March (Feb: 45,051) according to the Malaysian Automotive Association. This is equivalent to a total of RM9.9b in sales (Feb: RM6.2b), mainly attributable to an aggressive push by car dealers.

- Wholesale trade (8.6%; Feb: 6.2%): rose to a 10-month high due to higher sales of other specialised items (6.8%; Feb: 6.0%) and agricultural raw materials and live animals (18.2%; Feb: 15.9%).

- Retail trade (10.8%; Feb: 10.2%): continued to record a double-digit growth, driven mainly by an increase in sales at non-specialised stores (16.2%; Feb: 15.9%) and others in specialised stores (7.5%; Feb: 5.6%).

● Retail performance across advanced economies remained mixed

- US: slowed sharply to 7.3% (Feb: 17.8%) due to weakening consumer spending amid a 40-year high inflation reading of 8.5% in March.

- JP: rebounded by 0.8% (Feb: -1.0%) due to the full removal of the quasi-state of emergency curbs on March 22.

- KR: eased to a nine-month low of 2.3% (Feb: 4.1%) as consumers hold back on their spending due to worsening COVID-19 condition and rising inflationary pressure in March.

● 2022 distributive trade sales forecast maintained at 15.0% (2021: 4.0%) despite BNM’s faster-than-expected hike

- Even though we expect that consumer demand may weaken due to the BNM’s 25-basis-point hike and the expiry of various government relief measures in mid-2022, the continued recovery in the labour market and Malaysia’s further easing of the COVID-19 restrictions may help to support domestic retailers in 2H22. However, the ongoing supply-chain disruptions may continue to exert downward pressure on consumer spending.

- Amid strong domestic economic recovery prospects, private consumption growth is projected to expand by 6.1% in 2022 (2021: 1.9%), bringing the overall GDP to potentially settle around the 5.0%-5.5% range (2021: 3.1%).

Source: Kenanga Research - 13 May 2022