Retail Group Malaysia (RGM) downgraded Malaysia’s 2017 retail sales growth to 3.9% from 5%, after the fourth-quarter (4Q) year-on-year sales rise of 0.3% came in below market forecasts.
Research firm RGM said in a recent report it expected 2017 to be a “challenging” year for the country’s retailers, as consumers contended with higher cost of living amid a weaker ringgit.
“Malaysian consumers are expected to be cautious in their spending on retail goods during the first-half of this year (1H17). Their cost of living has risen and their purchasing power has reduced during the last one year,” it said.
For the 4Q of 2016 (4Q16), the report said the retail industry suffered another sharp drop in retail sales with a growth rate of 0.3%, compared to a growth rate of 1.3% during the same period in 2015.
It was also 95% below the estimate made by members of the Malaysia Retailers Association (MRA) in November 2016.
The 4Q16 growth rate was a letdown, taking into consideration that retail sales grew 1.3% in 2015. For the whole of 2016, the retail industry expanded by a mere 1.7% compared to 2015, according to the report. The RGM data is based on MRA’s member sales numbers. RGM said even year-end school holidays and festive celebrations did not motivate consumers to spend more, as the weak economic environment and bleak job prospects discouraged shoppers from buying more than usual.
The report said food and non-alcoholic beverages registered the highest increase in prices, especially the oils and fats sub-group.
Private consumption growth was sustained at 6.2% during 4Q16, supported by wage and employment growth, while the Malaysian Institute of Economic Research Consumer Sentiment Index dropped further to 69.8 on concerns of rising cost of living and future job prospects, the report added.
The report said the performance of department stores cum supermarket subsector worsened during 4Q16, suffering a decline of 2.3% with sales for the full year falling 3.4% — making it the worst performing retail subsector in 2016.
RGM expects department store cum supermarket operators to record a positive growth rate of 3.2% for 1Q17.
The supermarket and hypermarket subsector maintained growth rate at 0.5% for 4Q16, registering a minimal 0.7% growth for the full year, the report said.
Meanwhile, the fashion and fashion accessories subsector continued to fare well during 4Q16 at a growth rate of 6.9%.
RGM said the retail subsector was the best performing subsector in 2016 with a growth rate of 5.8%.
“Retailers in the fashion and fashion accessories sectors expect a positive growth of 2.5% during 1Q17,” it said.
“Retailers in the pharmacy and personal care subsector are optimistic of their business prospects, projecting a growth of 7.6% during 1Q17,” RGM said.
MRA members are pessimistic on sales performance in 1Q17 as consumer confidence remains low, and estimate an average growth rate of 0.9%. RGM forecasts a 1.5% improvement in overall retail business.
“The weak ringgit has affected the costs of a large number of retail goods sold locally and many retailers have begun to raise prices, including food and beverage, household goods, as well as other daily necessities,” RGM added.