Malaysia’s distributive trade growth moderated in May as wholesale and motor vehicle sales slowed, although resilient consumer spending continued to support retail activity, according to Kenanga Research.
The research house noted that total distributive trade sales increased 11.0% year-on-year in May, easing from 15.3% in April. While the growth rate moderated, it remained supported by a favourable base effect.
On a month-on-month basis, however, distributive trade contracted 2.0%, reversing April’s 3.5% expansion and marking the weakest monthly performance in three months.
Total sales also slipped to RM171.3 billion, down from RM174.9 billion recorded in April.
Retail spending remains resilient
Retail trade remained the strongest performer, with sales growth accelerating to 7.2% year-on-year from 6.3% previously.
The improvement was driven by stronger sales at non-specialised retail stores, including supermarkets and department stores, which expanded 8.2%, as well as higher sales at stalls and markets, which grew 8.1%.
Retail sales also rebounded 1.3% month-on-month after declining in April, indicating that household spending remained relatively resilient despite softer overall trade activity.
Wholesale activity loses momentum
Wholesale trade, however, lost steam after several months of robust expansion.
Sales growth slowed to 18.4% from 24.1% in April, mainly due to weaker growth in other specialised wholesale goods, which eased to 42.6%, and household goods, where growth moderated to 3.8%.
On a sequential basis, wholesale sales declined 3.3%, reversing April’s strong 6.6% increase.
Kenanga attributed the slowdown partly to the normalisation of wholesale inventory accumulation following earlier demand front-loading.
Motor vehicle sales decline
The motor vehicles segment contracted 2.3% year-on-year, reversing April’s 15.5% expansion.
Sales of motor vehicles fell 11.4%, with total vehicle sales dropping to 61,300 units compared with 69,600 units in the corresponding month last year.
Sales, maintenance and repair activities also slowed significantly, recording 9.1% growth compared with 38.7% previously.
On a month-on-month basis, the sector contracted 8.5%, suggesting softer consumer demand for vehicles after earlier strength.
Regional retail activity also moderates
Kenanga noted that retail activity across the region also showed signs of moderation in May.
Singapore’s retail sales growth eased to 3.0% from 5.4%, while Hong Kong’s retail sales slowed to 7.9% from 8.7%, reflecting weaker spending on food, beverages and department store purchases.
Domestic demand remains supportive
Despite the moderation in May, distributive trade performance remained robust overall, with cumulative growth for the first five months of 2026 accelerating to 9.7%, compared with 9.4% recorded over the January-April period.
Kenanga said earlier demand front-loading, wholesale inventory build-up, higher petroleum-related prices and favourable base effects had all contributed to the strong year-to-date performance.
The research house expects distributive trade growth to moderate further in the coming months as wholesale activity normalises alongside easing geopolitical tensions and lower global energy prices.
Nevertheless, it believes the retail segment could continue outperforming if tourism strengthens during the second half of the year.
Malaysia welcomed 10.6 million tourist arrivals during the first five months of 2026, representing a modest 1.1% year-on-year increase, leaving room for stronger growth as travel demand improves.
GDP outlook unchanged
Kenanga said recent high-frequency indicators continue to point to resilient economic activity during the second quarter of 2026.
Double-digit distributive trade growth alongside stronger industrial production in April and May suggests domestic demand remains a key pillar of the economy.
However, the research house expects growth momentum to moderate in the second half of the year as economic activity normalises, geopolitical uncertainties persist and favourable base effects diminish.
Kenanga maintained its 2026 distributive trade growth forecast at 6.1%, up from 5.6% in 2025, while keeping its 2026 GDP growth forecast at 4.5% to 5.0%, supported primarily by resilient domestic demand.
