Households slash spending more than half


THE Movement Control Order (MCO) has affected the country’s household spending patterns as the average household spending, including financial expenses, recorded a decrease of RM3,504 or 55%.

According to a recent research by the Department of Statistics Malaysia (DoSM), the average spending on consumption is estimated to decrease by RM1,923 or 48%.

The household spending pattern during the MCO reveals a contrast compared to before the MCO was implemented, as people’s focus now is to spend on essential goods and services such as food, utilities, health and communication.

Purchases of food and non-alcoholic beverages increased by 27% as a result of the need to purchase raw materials for home consumption.

Additionally, expenses for education and communication are also high as online learning services are being carried out while school and higher learning institutions remain closed.

There has also been an increase in the purchase of communication services as people are now relying on online communications to stay in touch with the outside world, while they are stuck at home.

The research conducted by DoSM studied household spending patterns based on the items normally bought by Malaysian households, to examine the amount of cash needed throughout the MCO.

It revealed a 95% drop in clothing and footwear purchases; expenditure on transportation dropped by 89%; restaurants and hotels (86%); household decoration, hardware and maintenance (72%); recreational and cultural services (71%); and alcoholic beverages and tobacco (65%).

Concurrently, spending on housing, water, electricity, gas and other fuel dwindled by 58%, while various goods and services, as well as health, by 39% and 38% respectively.

In terms of spending composition, the food and non-alcoholic beverages group dominated average spending by 44% compared to just 18% before the MCO.

This was followed by housing, water, electricity, gas and other fuel (19%), communication (10%) and various goods and services (9%).

On household spending by income class, the research showed a significant drop in consumption expenditure (59%) among the Top 20 income group (T20), followed by the M40 group (48%) and B40 (41%).

DoSM stated that if all households receive the official deferment of loans announced by Bank Negara Malaysia, the spending of the T20 group would decline significantly by 63% compared to prior to MCO, whereas the M40 and B40 income groups would fall 54% and 49% respectively.

The worldwide threat of Covid-19 has also affected interactions between national economic agents including the household, business and the foreign market sectors.

The situation poses a bigger challenge to the country’s economy despite the government injecting RM250 billion economic stimulus, the bulk of which (RM128 billion) goes to households, said DoSM.

“For the first quarter of 2020, private spending is expected to decrease by 8% to 10%. Financial aid and injections from the government need to be spent to boost the country’s economy.

“Delays in spending by households as a result of the MCO and Covid-19 concerns will also slow down the economic recovery process,” it added.