Retail sales grew by 34.5% year-on-year (y-o-y) in August thanks to strong domestic spending, MIDF Research found.
The research firm said retail trade grew by 0.7% from July, 2022, driven by stable inflationary pressure, an improving labour market and accommodative monetary and fiscal policies.
In a statement today (Oct 13), it cited that the high growth rates were also attributed to low-base effects as Malaysia was under a strict Covid-19 lockdown from July to September last year.
“Looking ahead, we opine the upbeat momentum of domestic demand to continue in the third quarter of 2022 amid strong economic fundamentals and low-base effects,” it said.
Retail spending is one of three components of distributive sales, which expanded by 33.7% y-o-y in August and grew by double digits for the fifth consecutive month.
In general, Malaysia’s consumer spending remained solid as reflected in the positive month-on-month growth in retail trade sales, said MIDF Research.
“Only sales of household equipment and automotive fuel saw trivial contraction during the month.
“We opine the strong economic fundamentals, especially declining jobless rate and stable inflation rate, will continue to support Malaysia’s consumer spending in the second half of 2022 and 2023,” it said.
The other components were wholesale trade, which grew by 16%, and motor vehicle sales, which grew by 185.3%.
The percentage of distributive sales contributed by motor vehicles returned to pre-pandemic levels at 12.4%, double the rate recorded in the same month of last year.
MIDF Research maintained its retail trade growth forecast at 17.6% for 2022 as Malaysia’s consumer spending was seen expanding, as reflected by the retail trade sales growth of 21.3% in the first eight months of 2022.
“Looking at the macro-outlook and improving fundamentals, we project retail trade growth [to be at] 17.6% for this year.
“We believe pent-up demand will continue until the end of this year underpinned by improving labour market, stable inflationary pressure and domestic economy reopening.
“Even though OPR (overnight policy rate) is on the upward trajectory, we believe it would have minimal effect on domestic spending.
“OPR is set to reach 2.75% by the end of this year, still below 2019’s level of 3%.
“We believe Malaysia’s monetary policy is on a normalisation process rather than a tightening path, possibly [reaching] 3% by early 2023,” it said.