• Distributive trade sales growth accelerated to a 14- month high of 7.1% YoY in May (Apr: 6.6%), driven by sustained domestic demand in 2Q24
  
  − MoM growth rebounded (2.0%; Apr: -0.6%) following a marginal contraction in the previous month.
  
  − Sales value (RM147.9b; Apr: RM144.9b): surged to a record high.

• Strong distributive trade sales in May mainly due to higher retail trade
  
  − Retail trade (8.7%; Apr: 5.5%): growth surged to a 13-month high, driven mainly by the expansion in other goods in specialised stores (12.8%; Apr: 8.4%), followed by non-specialised stores (10.7%; Apr: 5.2%), and food, beverages & tobacco in specialised stores (9.6%; Mar: 7.2%).
  
  − Wholesale trade (4.7%; Apr: 4.8%): growth moderated slightly but remained supported by expansion in sales of household goods (6.5%; Apr: 4.4%), and food, beverages & tobacco (6.2%; Apr: 6.6%) albeit slower slightly.
  
  − Motor vehicles (10.5%; Apr: 18.1%): slower growth due to the high base effect from the previous year, as unit sales (68.7k units; Apr: 58.0k) increased sharply compared to the previous month, while in value, sales of motor vehicles (11.1%; Apr: 26.5%) slowed. Nonetheless, growth for the month was also attributed to maintenance & repair (12.8%; Apr: 13.1%), followed by parts & accessories (11.9%; Apr: 11.8%).

• Mixed performance of retail sales across regional economies in May
  
  − China: retail trade growth expanded (3.7%; Apr: 2.3%), partly due to the holiday travel surge and low base effectfrom last year.
  
  − Japan: expanded (2.8%; Apr: 2.0%) to a three-month high, driven by higher commercial sales.
  
  − Hong Kong: fell (-11.5%; Apr: -7.0%) for the third straight month, weighed by weak sales of motor vehicles and parts.

• We maintain our 2024 sales growth forecast at 8.0% (2023: 7.7%) in anticipation of sustained domestic demand
  
  − Year-to-date, sales growth grew 6.0% (Jan-Apr: 5.7%) lower than 10.2% recorded in the same period last year.Nevertheless, we still expect growth to be sustained in the coming months. This is largely due to the positive impact of EPF Account 3 withdrawal on domestic demand. According to the Finance Ministry in a parliamentary written reply recently, EPF members have withdrawn RM7.81b from Account 3 as of June 24 which involves 3.16m members since Account 3 started on May 11. Notably, a total transfer of RM11.52b to Account 3 was made by 3.61m members. This indicates that around 0.45m members have yet to withdraw RM3.71b, while actual spending is expected to have an impact on the real economy from June onwards. Additionally, the continued increase in tourist arrivals and the relaxation of requirements for Malaysia My Second Home (MM2H) are expected to fuel further growth in the retail trade segment, contributing to our robust growth outlook.
  
  − With that said, we have earlier revised 2Q24 GDP growth to expand to 5.1% from the previous estimate of 4.3% (1Q24: 4.2%), with overall 2024 GDP growth projected to settle at 4.5% - 5.0% (2023: 3.6%).

Source: Kenanga Research - 12 Jul 2024