• Distributive trade sales growth expanded to a three- month high in February (5.5% YoY; Jan: 5.4%)
  
  − However, MoM growth contracted (-0.9%; Jan: 1.1%) for the second straight month, albeit at a smaller rate.
  
  − Sales value (RM141.1b; Jan: RM142.4b): fell slightly.

• Sustained sales in February due to higher sales of retail trade, which partially mitigated the sharp slowdown in motor vehicles
  
  − Retail trade (5.8%; Jan: 2.6%): accelerated, led by higher sales of others in specialised stores (9.5%; Jan: 4.9%), followed by food, beverages & tobacco (8.0%; Jan: 6.2%).
  
  − Motor vehicles (5.4%; Jan: 16.0%): slowed sharply to an eight-month low, largely weighed by lower vehicle sales value (0.2%; Jan: 20.9%) in line with lower unit sales (62.8k units; Jan: 65.5k units) during the month.
  
  − Wholesale trade (5.2%; Jan: 5.5%): growth moderated slightly, weighed by lower sales of other specialised (7.4%; Jan: 8.3%) and machine, equipment & supplies (1.7%; Jan: 4.5%). Nevertheless, it was partially mitigated by higher sales of household goods (3.7%; Jan: 2.9%).

• Mixed performance of retail sales across regional economies in February
  
  − Japan: expanded (4.6%; Jan: 2.1%) to a three-month high
  
  − Singapore: rose sharply (8.4%; Jan: 1.6%), marking its second straight month of gains driven by the festive season period and tourist spending.
  
  − Hong Kong: edged up (1.9%; Jan: 0.9%), boosted by higher growth in tourism activities and domestic consumption.

• 2024 sales growth forecast is maintained at 8.0% (2023: 7.7%) at the moment
  
  − We maintain our 2024 sales growth, anticipating it to be driven by robust domestic demand. This is supported by a projected decline in the unemployment rate to an average of 3.2% this year (2023; 3.4%), alongside a rise in tourist arrivals and spending. However, we remain cautious in our outlook due to the uncertainty in the mechanism of subsidy rationalisation, which could potentially weigh on consumer spending and subsequently affect overall sales growth.
  
  − Nevertheless, we continue to project an expansion in 1Q24 GDP growth at 3.3% (4Q23: 3.0%) given the sustained domestic demand, backed by recovery in the manufacturing sector. Likewise, we maintain our 2024 GDP growth forecast at 4.5% - 5.0% (2023: 3.7%), reflecting our expectation of a further rebound in the manufacturing sector, particularly the export-oriented sub-sector.

Source: Kenanga Research - 9 Apr 2024