Consumers continue to spend despite economic worries

The sales value in March 2019 rebounded 5.7% compared to 5% in the previous month

by S BIRRUNTHA / pic by TMR FILE PIX

THE slowing economy, lower corporate earnings, muted equity market and heightened global trade war have not doused consumer confidence as pockets of the retail sectors are still enjoying brisk sales.

March 2019 sales figures showed that the whole and retail trade recorded transactions valued at RM109.3 billion, a 5.4% jump compared to March 2018, according to the country’s Department of Statistics.

The sales value in the third month of the year rebounded 5.7% compared to 5% in February 2019. Volume index for wholesale and retail trade rose 5.1% to 176.9 points compared to the same month a year ago.

However, consumer confidence took a beating in the first quarter of this year (1Q19), dropping to 83 from 102 in 4Q18.

Retail Group Malaysia (RGM) has forecast a 4.5% growth in retail sales this year, valued at RM108.3 billion after what was seen as the “soft” two months of the year. Retail sales only grew 3.9% to RM103.7 billion last year.

Some retailers are already seeing higher footfall at their outlets, especially with the coming Hari Raya Aidilfitri celebration early next month.

Mydin Mohamed Holdings Bhd, one of the country’s largest retailers, has also registered better sales.

Mydin MD Datuk Dr Ameer Ali Mydin said Mydin has posted higher sales presently compared to about 12 months ago.

“The consumer spending from our perspective when we compare the last 10 days against the same period a year ago, it is better now with about a 5% increase in terms of sales.

“We find the consumer sentiment is coming back slowly. I think if the government continues with great plans and projects, we will see better consumer spending in the last quarter,” he told The Malaysian Reserve (TMR) recently.

But Ameer Ali, who has been vocal in the past, said there are worries about the state of the economy.

“The overall economy is still down, hence it may affect consumer spending in the near future,” he said.

Ameer Ali said the government’s decisions to pull the handbrakes on spending and cause delays in the implementation of big projects have affected the economy.

The government revisited many mega projects initiated by the previous administration as Putrajaya sought to plug huge financial holes.

The decisions and delays, however, had created anxiety among investors. The country’s stock market turned dovish and became the worst performing equity market in the world, erasing more than 260 points and wiping billions in value.

The ringgit has also depreciated by almost 1% this year, dropping to RM4.17 against the US dollar last Friday.

“We do believe customers are still spending. Just that they may go for cheaper brands. They are also looking for more promotions and value buys, for example ‘buy1-get-1-free’,” said KK Supermart and Superstores Sdn Bhd founder and executive chairman Datuk Seri Dr KK Chai.

“The trend is going to remain as it is or get better in the coming days,” he said in a text reply.

He is also positive about the government’s direction to rid the county of corruption and unnecessary expenses.

“This, we believe, will ensure more cash flowing within the country,” he said, adding that the central bank’s decision to slash the policy rate will also encourage people to spend.

But he warned that customers are generally more cautious on their spending, especially the lower-income group and those who have limited budgets.

Malaysia Retail Chain Association VP Datuk Liew Bin said consumers are more careful in making their purchases, but signs have been positive.

“The market sentiment for the retail industry is getting better right now, especially with more big projects coming up right now,” Liew told TMR.

“When we did a survey on retail recently, we found out that the overall retail still grew at about 4.9% because some of them have ventured into the online market and opened more branches.

“When their business grows, their operating expenditure (opex) grows too. This increases the overall GDP growth, but it does not deflect the company’s profit because the opex increases. I hope 2Q19 will be much better than the current quarter right now,” he said, adding that the food industry and convenient store retailers are registering a strong year.

He said convenient stores like KK Supermart are becoming an integral part of people’s lives.

However, Liew said the fashion industry has been heavily affected and it is showing signs of another disappointing growth this year.