Data Highlights

• Malaysia's Distributive Trade Index (DTI) rose by 3.8% YoY to 158.6 points in August 2024, underperforming the 5.5% YoY growth recorded in the previous month. Despite this moderation, the DTI's performance remained supported by the continued resurgence in economic activity, driven by improvements in the labour market and manageable inflation throughout the month. On a month-on-month basis, the DTI edged up by 0.3%, recovering from a 1.7% MoM decline in June 2024. Meanwhile, Malaysia's Distributive Trade Sales posted a moderate 4.7% YoY expansion, reaching RM149.2bn, down from the 6.7% YoY (0.1% MoM) growth seen previously.
   
• By subsegments:
   
  • The Volume Index for Wholesale Trade, holding the largest share of the total distributive trade at 44.9%, registered a 3.8% YoY (Jul24: 5.2% YoY) increase to 145.7 points.
     
  • Similarly, Motor Vehicles experienced a moderate growth with the index stood at 139.9 points, declined from a month ago by 0.9% and recorded a slower growth of 2.8% YoY (Jul24: 10.8% YoY).
     
  • In the meantime, the Retail Trade sector experienced a 3.8% YoY growth, reaching 179.7 points. Although this marks a positive gain, it is a deceleration compared to the 5.5% YoY growth recorded in July 2024.
     
  • Refer to Figure 3 for detailed performance data of each segment.
     
• 8M24, the DTI increased by an average of 4.4% YoY. Analysing this trend, the three-month moving average of the index showed a 4.6% YoY expansion in July 2024, reflecting a deceleration from the previous average of 5.2% YoY.

• We remain confident that consumer spending will remain resilient throughout the year, supported by several key factors. Improvements in the labour market are driving higher disposable income, with the unemployment rate ticking down to 3.2% in August (from 3.3% in July). Additionally, stable employment growth across key sectors is contributing to greater income security and boosting consumer confidence.

• Additionally, manageable inflation has supported purchasing power, with headline inflation remaining moderate at around 2.0%. This has eased the pressure on households, allowing more room for discretionary spending. Stable and consistent household incomes, particularly due to wage gains in urban areas, and additional disposable income from EPF Account 3 withdrawals have further helped sustain consumption, particularly among middle-income households.

• However, there are emerging factors that may cause consumers to become more cautious with their spending in the coming months. The potential increase in fuel prices, particularly RON95, next year could prompt households to start saving in anticipation of higher transportation and living costs. Any adjustment in fuel subsidies could squeeze disposable incomes, encouraging consumers to set aside more for future uncertainties.

• In addition, geopolitical tensions—whether related to global trade, conflicts, or supply chain disruptions—could dampen sentiment. Malaysia, as a trade-dependent economy, is vulnerable to external shocks that may affect consumer and business confidence. Heightened uncertainty on the global stage could lead to more conservative spending behaviour.

• However, a strengthening ringgit could result in lower import costs for goods, mitigating consumer prices. A stronger ringgit generally benefits domestic purchasing power as it lowers cost of imported consumer products, including electronics, household items, and foodstuffs, thereby exerting downside pressure on prices and benefitting consumption.

• Despite these headwinds, the overall economic landscape remains positive, and we expect personal spending growth to be sustained for the rest of the year. 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. However, the potential for more cautious consumer behaviour heading into 2025, driven by concerns over rising living costs and external risks, warrants close monitoring.

Source: TA Research - 14 Oct 2024