Consumers’ confidence stays low for a 2nd consecutive quarter

by NUR HAZIQAH A MALEK / pic by HUSSEIN SHAHARUDDIN

Local consumers are still wary of job prospects and the increasing cost of living to spend more in retail, marking its second consecutive time hitting below the 100-point threshold level.

According to the Malaysia Retail Industry Report for June 2019 by Retail Group Malaysia (RGM), the Consumer Sentiment Index by Malaysian Institute of Economic Research dropped further to 85.6 points.

“Malaysian consumers were still wary of their job prospects and the rising cost of living as unemployment rate during the first quarter of 2019 (1Q19) maintained at 3.3%,” it said.

However, despite the persistent concerns on spending, the retail market generated more turnover than market’s expectations for the 1Q, posting as much as 3.8% growth against the estimate of 3.1%.

The growth also grew year-on-year against the 2.6% posted in the same period last year and also higher against the October through December 2018 period, which registered a 2.7%.

RGM said the national economy posted a moderate growth rate of 4.5% during 1Q19, compared to the 3.8% growth in retail.

“Higher public expenditure and sustainable private consumption contributed to the latest economic growth,” it said.

In regards to inflation, RGM said the two notable increases during the period from January through March 2019 were essential goods and services, like foods and non-alcoholic beverages, as well as housing, water, electricity, gas and other fuels.

“In March 2019, inflation rate rose by 0.2%, while transportation cost returned to positive zone with 2.6% increment.

“The average inflation rate during 1Q19 was -0.3%. Malaysia recorded deflation during the first two months of the
year , whereby it was -0.7% in January and -0.4% in February,” it added.

Among the subsectors, the pharmacy and personal care was the best performer during the quarter, posting a strong growth rate of 11.8% in the quarter, followed by the department store cum supermarket at 6.2%.

The supermarket and hypermarket subsector, however, maintained its position in the red at -2.3%.

Moving forward, the retailers’ association members projected an average growth rate of 5.5% for the April through June period with department store operators expecting to recover strongly.

“The department store cum supermarket operators are expecting to maintain their average growth at 6.9% for 2Q19.

“On the other hand, supermarket and hypermarket operators expect to remain in the red zone with a -7.4% growth rate for 1Q19,” it said.

Meanwhile, fashion retailers expect businesses to pick up with a growth of 4.2%, while the pharmacy and personal care are positive their businesses will post a growth rate of 15.2%.

“Similarly, retailers in other specialty stores subsector are very hopeful that their businesses will climb higher with
a growth rate of 10.8% during the second three-month period of this year,” it said.

Due to the positive performance in the first half of the year, RGM has revised its projected retail sales growth rate
in 2019 from 4.5% estimated in March 2019 to 4.9%.

“Despite the weak economic environment from both internally and externally, the higher growth expected during 1Q19 is mainly due to the Hari Raya period.

“This festival in Malaysia is celebrated earlier this year compared to 2018,” it said.

The retail sales growth rate for the 3Q is maintained at 3.9% as a slowdown in the retail growth is expected following the major festival season, while the estimated growth rate for the following quarter remains at 5.8% on the back of school holiday, year-end festival and expected higher economic activities.