• Malaysia's Distributive Trade Index (DTI) rose by 5.5% YoY to 158.2 points in July 2024, outperforming the 4.5% YoY gain observed in the previous month. This positive momentum can be attributed to the ongoing resurgence in economic activities, supported by an improved labour market throughout the month. Moreover, on a month-on-month basis, the DTI increased by 1.7%, compared to a 0.8% MoM decline in June 2024. Simultaneously, Malaysia's Distributive Trade Sales saw a commendable 6.7% YoY expansion, reaching RM149bn, up from a 5.4% YoY growth previously.

• The upswing in Malaysia's DTI was notably buoyed by gains across all key segments, including Retail Trade, Motor Vehicles, and Wholesale Trade.
   
  • The Volume Index for Wholesale Trade, holding the largest share of the total distributive trade at 44.9%, registered a 5.2% YoY increase to 146.0 points. It marked an improvement from the 3.2% YoY gain recorded in the previous month. Namely, Wholesale of Food, Beverages and Tobacco rose by 9.0% YoY, and Wholesale of Machinery, Equipment and Supplies increased by 8.8% YoY.
     
  • Similarly, Motor Vehicles experienced a healthy growth with the index reaching 141.1 points, faster from a month and a year ago by 11.2% and 10.8% YoY, respectively. All sub-sector recorded a better growth such as Sales of Motor Vehicles (13.2% YoY), followed by Sale, Maintenance and Repair of Motorcycles (10.2% YoY), Sale of Motor Vehicles Parts and Accessories and Maintenance (8.5% YoY) and Repair of Motor Vehicles (4.6% YoY)
     
  • In the meantime, the Retail Trade sector experienced a 4.6% YoY growth, reaching 178.1 points. Although this marks a positive gain, it is a deceleration compared to the 6.3% YoY growth recorded in June 2024. Most subcomponents posted lower growth rates for the month, with Retail Sales in Non-Specialised Stores leading at 6.1% YoY, followed by Retail Sales of Food, Beverages, and Tobacco in Specialised Stores at 6.2% YoY, and Retail Sales of Other Goods in Specialised Stores at 3.6% YoY.
     
  • This slowdown could be partially attributed to the government's earlier decision to allow diesel prices to float, which may have tempered consumer spending. However, the impact appears minimal, as the sector continues to grow steadily. The potential for a more significant effect looms if subsidy rationalisation for RON95 is implemented, which could put greater pressure on household budgets, dampening retail consumption in the future.

• In the first seven months of the year, the Domestic Trade Index (DTI) increased by an average of 4.5% YoY. Analysing this upward trend, the three-month moving average of the index showed a 5.2% YoY expansion in July 2024, reflecting a positive shift from the previous average of 4.9% YoY.

• We believe consumer spending is poised to remain resilient throughout the year, supported by several key factors: improvements in the labour market, manageable inflation rate, stable and consistent household incomes, and additional disposable income from the Employee Provident Fund (EPF) Account 3 withdrawals. Overall, this performance signals a promising start for the third quarter, and we expect sustained personal spending growth moving forward. Consequently, we are maintaining our forecast for real GDP personal spending growth at 6.0% YoY for 2024, up from 4.7% YoY in 2023.

Source: TA Research - 10 Sept 2024