● Distributive trade sales continued to register a double-digit growth in May (19.9% YoY; Apr: 15.2%) on increasing retail spending amid a higher pick-up in international travellers’ receipts

- Sales value (RM129.8b; Apr: RM128.0b): hit a new record high (data recorded since Jan 2013), mainly attributable to a notable increase in retail sales value (RM56.3b; Apr: 53.6b) due to higher tourist spending. However, the total sales value slowed to a three-month low of 1.4% MoM (Apr: 3.4%) due to April’s high base.

● Improvement in retail and wholesale trade sectors outweighed lower motor vehicle sales value

- Retail trade (29.9%; Apr: 20.9%): surged to a 13-month high, driven mainly by higher sales at non-specialised stores (36.3%; Apr: 26.4%) and others in specialised stores (30.8%; Apr: 19.2%).

- Wholesale trade (11.7%; Apr: 11.5%): expanded for the fifth straight month, mainly due to an increase in sales of other specialised items (8.8%; Apr: 6.5%) and agricultural raw materials and live animals (17.7%; Apr: 14.9%).

- Motor vehicles (20.1%; Apr: 11.3%): increased to a one-year high due to a favourable base effect. On a monthly basis, sales value dropped by 1.4b or -9.6% MoM as microchip shortages continued to impact deliveries.

● Retail trade performance across advanced and developing economies remained mixed

- US: despite rising on a YoY basis (11.2%; Apr: 11.2%) due to a lower base, US consumers are starting to pull back on spending as May inflation rate jumped to a new four-decade high (8.6% YoY). Retail sales fell by 0.3% MoM (Apr: 0.7%).

- SG: soared to a near one-year high of 17.8% (Apr: 12.1%) as food and beverage sales recorded a substantial growth of 40.1% (Apr: 11.6%), mainly due to higher demand for events and in-flight catering

- ID: slowed to 5.4% (Apr: 8.5%), its weakest level since September 2021, due to a deterioration in food, beverages, and tobacco sales amid rising raw material prices.

● 2022 distributive trade sales forecast maintained at 15.0% (2021: 4.0%) as demand is expected to stay strong

- Total sales value may continue to hover around the RM120.0-130.0b mark in the next few months as domestic demand and tourism-led spending are expected to remain strong. However, increasing interest rates, rising inflationary pressure and tightening financial conditions may have a significant adverse impact on consumer spending in 2H22.

- Coupled with the low base effect, value-added private consumption growth is projected to expand 6.7% in 2Q22 (1Q22: 5.5%). Consequently, 2Q22 GDP growth is expected to settle at around 7.7% (1Q22: 5.0%).

Source: Kenanga Research - 12 Jul 2022