Malaysia's domestic spending increased sustainably as the overall distributive trade expanded faster at +6.7%yoy in Jul-24, growing for the 34th consecutive month since Oct-21. The continued expansion reflected a more encouraging sales performance for motor vehicles (+12.2%yoy) and wholesale trade (+5.5%yoy), and sustained rise in retail trade albeit at relatively moderate pace.
Looking at the seasonally-adjusted data, the stronger growth in volume of distributive trade by +5.3%yoy (Jun-24: +4.3%yoy) was particularly attributable to a rebound in motor vehicle sales (+8.7%yoy; Jun-24: – 0.6%yoy) and stronger growth in wholesale trade (+5.1%yoy; Jun-24: +3.1%yoy).
Kenanga commenting on the latest figures released by the Department of Statistics said it continues to expect the positive labour market conditions and higher tourist arrivals, as well as the flexibility to tap retirement fund and cash assistance from the government, will underpin positive outlook for the distributive trade in the coming months. However, rising cost of living and pessimistic consumer confidence could affect future spending plans, which may be influenced by the government's plan to further rationalise subsidy allocations.
As of 7MCY24, Malaysia's distributive trade sales increased by +6.0% (2023: +7.7%), supported by +9.3%yoy rise in motor vehicle sales (2023: +12.3%) and continued increases by +6.3% (2023: +9.0%) in retail trade and +4.8%yoy (2023: +5.2%yoy) in wholesale trade.
The house said it maintains its projection that the domestic retail trade will grow at +5.0% this year (2023: +9.0%yoy), reflecting sustained expansion in consumer spending backed by rising income and employment, recovery in tourist arrivals and policy measures such as higher allocation for cash assistance to B40. Meanwhile, the flexible access to some of retirement funds and timely shift to targeted subsidies may result in more encouraging spending outlook, which mitigated the inflationary effects from policy changes.
Kenanga said it is also wary that consumers will continue to express pessimism and curtail spending plans as they are more focused to rising price levels.
