● Distributive trade sales growth slowed further in December (13.8% YoY; Nov: 14.2%), its lowest in nine months amid the high base effect recorded last year. For the whole of 2022, distributive trade sales settled at 19.6% (2021: 4.0%), a tad below our forecast of 20.0%

- Sales value (RM137.3b; Nov: RM134.3b): hit a record high with strong MoM growth (2.3%; Nov: 0.5%) thanks to a sustained expansion in motor vehicles.

● Growth slowdown was recorded in wholesale trade but partially mitigated by an expansion in motor vehicles

- Wholesale trade (4.7%; Nov: 5.6%): moderated to a 12-month low. Nonetheless, its MoM growth rebounded (1.4%; Nov: -0.6%) following three straight months of contraction.

- Retail trade (22.7%; Nov: 22.8%): slowed slightly, weighed by a moderation in other specialised stores (30.7%; Nov: 32.8%) and household equipment (12.6%; Nov: 14.8%).

- Motor vehicles (20.3%; Nov: 19.8%): bucked the trend as it expanded to a three-month high due to a record high vehicle sale of 76.7k units (Nov: 64.4k). On MoM basis, growth surged by 9.3% (Nov: 4.0%), highest in four months.

● Retail trade growth remained pressured in December across advanced and developing economies

- US: slowed to a 22-month low (7.0%; Nov: 7.2%), reflecting a weak demand as inflation remained elevated.

- CN: fell for the third straight month (-1.8%; Nov: -5.9%) but at a softer pace amid the impact of COVID-19 infections.

● Distributive trade sales growth is expected to slow sharply to 1.3% in 2023 (2022: 19.6%)

- Attributable to a dissipation of the lower base effect and in tandem with the global economic slowdown amid the impact of inflationary pressure and tighter financial conditions. Nonetheless, sales value may remain supported in the near term due to strong seasonal factors and continued increase of tourist arrivals and spending.

- Given the sharp slowdown recorded in distributive sales figures for 4Q22 (14.3%; 3Q22: 32.3%), we maintain the private consumption growth forecast to moderate sharply to 8.7% in 4Q22 (3Q22: 15.1%), bringing to a slower GDP growth of 6.6% in 4Q22 (3Q22: 14.2%) which slated to be released this Friday. Therefore, 2022 GDP growth is expected to settle at 8.6% (2021: 3.1%) and to moderate further to 4.3% in 2023 amid normalisation in economic activity and the impact of global growth slowdown.

Source: Kenanga Research - 9 Feb 2023