KUALA LUMPUR: User sentiment remains low despite the approaching festive season and short school holidays as consumers continue to be cautious in their spending due to macroeconomic uncertainties.

AmInvestment Bank Bhd, in a note today, explained that consumer spending on discretionary items would be cautious as the government will introduce several taxes in 2024, such as a 10 per cent sales tax on low-value imported goods sold online starting April 1, a 5.0 to 10 per cent tax rate hike on certain high-value goods (HVGT), and a 2.0 per cent increase in the service tax rate from 6.0 per cent to 8.0 per cent effective March 1.

"We expect retailers to continue opening new stores and enhancing the diversity of their product offerings. This is to attract higher interest in their stores to maintain revenue amidst weak consumer sentiment and demand for discretionary items," the research firm said.

AmInvestment stated that the Malaysian Institute of Economic Research (MIER) reported a 15 per cent year-on-year (YoY) decline in the consumer sentiment index to 89.4 points compared to the fourth quarter (4Q) of 2022.

"Although inflation remains low, the potential rationalisation of subsidies in the second half of 2023 could increase inflationary pressures ahead," it said.

Therefore, AmInvestment Bank has maintained a 'neutral' recommendation on the consumer sector based on cautious spending in the future, influenced by the trend of declining trade as consumers begin seeking competitive prices or non-branded goods.

"Key risks include slower-than-expected economic growth, higher-than-expected unemployment rates, commodity price increases beyond forecasts, and slower-than-expected tourist arrivals," it added.