● Distributive trade sales growth moderated in December (4.8% YoY; Nov: 6.2%), marking a sixmonth low, partly attributed to the high base effect, as MoM growth expanded (1.0%; Nov: 0.2%) to a four-month high

− Sales value (RM143.9b; Nov: RM142.6b): expanded to a record high.

− 4Q23 (5.8%; 3Q23: 6.8%): growth moderated, indicating a slower momentum during the quarter.

− 2023 (7.7%; 2022: 19.6%): overall, growth moderated sharply, lower than double digit growth recorded in 2022, but slightly above house forecast of 7.1%.

● Slower sales in December due to weak sales of vehicle and wholesale trade, but partially supported by higher sales of retail trade

− Motor vehicles (5.9%; Nov: 12.7%): slowed sharply to a six-month low, primarily due to a moderate growth in vehicle sales (4.4%; Nov: 13.5%) amid high base effect in the previous year. Notably, unit sales surged (78.4k units; Nov: 71.9k units) to a nine-month high.

− Wholesale trade (4.4%; Nov: 6.2%): growth moderated to a six-month low due to weaker sales of agriculture raw materials & live animals (5.4%; Nov: 9.5%) and other specialised (6.2%; Nov: 9.3%), with combined contribution to overall growth declined to 1.2 ppts (Nov: 1.9 ppts).

− Retail trade (5.0%; Nov: 4.4%): expanded due to higher sales of household equipment (5.9%; Nov: 3.7%) and others in specialised stores (5.8%; Nov: 3.7%). Both combined contribution expanded to 0.8 ppts (Nov: 0.5 ppts).

● Slower growth in retail sales across regional economies in December

− China: moderated to a three-month low (7.4%; Nov: 10.1%), with overall growth settled at 7.2% in 2023.

− Singapore: retail sales excluding motor vehicles fell marginally (-0.4%; Nov: 2.4%) to the lowest in 11 months, mainly due to weak sales in recreational goods, optical goods and books, and furniture and household equipment.

− Hong Kong: growth slowed (7.8%; Nov: 15.9%) following a surge in the previous month. Overall the value of retail sales rose 16.2% in 2023.

● 2024 sales growth forecast retain at 8.0% for now

− Sales growth is expected to stabilise in the near term, increasing by a single digit, supported by a rise in tourist arrivals and stable labour market. The unemployment rate is projected to average 3.3% this year, down from an estimated 3.5% in 2023. However, we are adopting a cautious outlook due to the potential impact of subsidy rationalisation, which could dampen consumer spending and subsequently affect sales growth.

− We’re maintaining our 4Q23 GDP growth target at 3.7% (3Q23: 3.3%), slightly above DOSM’s preliminary estimate of 3.4%, with the full-year 2023 GDP expected to be between 3.5% - 4.0% (2022: 8.7%). For 2024, we project growth to expand to 4.9%, driven mainly by the manufacturing sector’s expansion, especially export-oriented industries, due to anticipated technology upcycle and China's gradual recovery.

Source: Kenanga Research - 9 Feb 2024