Slow economic momentum and limited policies to stimulate consumers’ spending hamper retail growth
by SHAHEERA AZNAM SHAH/ pic by HUSSEIN SHAHARUDDIN
MALAYSIA’S consumer sentiment is expected to dwindle for the remaining of the year as the country continues to absorb the backwash of the external market volatility and domestic headwinds.
Retail Group Malaysia (RGM) MD Tan Hai Hsin said the association has revised the retail sales growth for the year from 4.9%, estimated last June, to 4.4% due to the latest market performance.
“Malaysia’s retail industry performance continues to be affected by both internal and external market environments.
“Within the country, slow economic momentum and limited policies to stimulate consumers’ spending hamper the growth of retail stores while the trade disputes among major economies led to slower export growth, declining stock market performance and weakening local currency,” he said in the Malaysia Retail Industry Report September 2019.
Tan said the quarterly growth performance for the last three months of 2019 was maintained at 5.8% as estimated in June.
“Year-end school holiday, Christmas celebration and aggressive promotions by retailers should move the sale of consumer goods during this period.
“Potential interest-rate cut before the end of this year may boost retail spending as well,” he said.
Growth rate improved to 4.5% in the April-June period this year compared to last year’s performance in a similar period with only 2.1%.
“A year ago, the retail sales growth rate was only 2.1%. In June 2018, the Goods and Services Tax was reduced from 6% to 0% and Hari Raya was also celebrated during the same month.
“However, Malaysian consumers did not go all out to spend on all kinds of retail goods mainly because they did not have extra incomes to do so,” he said.
Still, the performance in 2Q19 was 18% below the market expectation as the Malaysia Retailers Association projects a 5.5% growth for the period.
“Hari Raya — the largest festival in Malaysia — was celebrated earlier this year compared to 2018. As a result, spending by Malaysians during this festival started earlier and (it) had boosted retail spending to a certain extent.
“However, uncertain economic prospects mainly due to the external factors had discouraged Malaysian consumers to buy more,” he said.
For the industry’s sub-sector, Tan said the sales performance of the supermarket and hypermarket was the worst with a negative growth of 2.9%.
“Supermarket and hypermarket sub-sector continues to report negative growth as a result of closures of some stores.
“This sub-sector was the worst performer during the latest quarter. This was the eighth consecutive quarter of negative growth reported on this sub-sector,” he said.
Tan said the supermarket and hypermarket operators are pessimistic on the businesses as the sub-sector’s continuous decline is expected to persist in 3Q19 with a forecast of a negative 8.9%.
Tan added that the department store cum supermarket sub-sector achieved a sustainable growth rate of 5.7% during the AprilJune period while the department store sub-sector contracted by 0.7%.
“This sub-sector has been facing slow growth for more than a year,” he said.
For the July-Sept growth expectation, Tan said the retailers maintained a positive outlook on the retail businesses with a projected growth rate of 3.2%.