Members of Malaysia Retailers Association (MRA) were interviewed on their retail sales performances for the first half-year of 2017.
Latest retail performance
For the first quarter of 2017, Malaysia retail industry recorded another disappointing growth rate of -1.2% in retail sales, as compared to the same period in 2016.
This latest quarterly result was again below market expectation. It was lower than the estimate made by members of MRA (at 0.9%) as well as projection made by Retail Group Malaysia (at 1.5%) in March 2017.
A year ago, retail industry contracted by 4.4% due to strong pre-GST sale in 2015. Unfortunately, it could not recover a year later.
This latest poor quarterly growth rate was also due to weak Chinese New Year sales in January 2017. Shoppers were careful in their spending on festive goods.
In addition, prices of retail goods continued to rise since the beginning of this year, mainly due to our weak Malaysian currency and higher fuel prices.
Average pump price for RON95 during the first quarter of 2017 was the highest since the implementation of managed float system in December 2014.
Malaysian consumers turned cautious as they were burdened by higher cost of living.
Comparison of retail sales with other economic indicators
For the first quarter of 2017, Malaysia national economy recorded a sustainable growth rate of 5.6%, as compared to -1.2% for retail sales (at current prices).
Private investment, export and public sector consumption were the main drivers of growth during this period.
The average inflation rate during the first quarter of 2017 rose faster by 4.3%. The consumer price index recorded high rates in January (3.2%), February (4.5%) and March (5.1%).
The highest increase was transportation (17.9% in February and 23.0% in March), followed by foods and non-alcoholic beverages (4.1% in March).
Higher fuel prices during the 3-month period had led to price increases of many retail goods and services. The March inflation rate of 5.1% was at the highest level in 8 years.
Private consumption grew by 6.6% during the first quarter of 2017. Malaysian consumers are now spending more on dining out, services and internet shopping.
During the latest quarter, the Consumer Sentiment Index (by MIER) climbed to 76.6.
However, it was still below the 100-point threshold level of confidence. This is the 11th consecutive quarter of index that fell below the 100 marks. Malaysian consumers were still concerned on their rising cost of living.
Unemployment rate during the first quarter of 2017 maintained at 3.5%.
Retail sub-sectors’ sales comparison
Except Pharmacy and Personal Care sub-sector, all retail sub-sectors recorded declines in their retail businesses during the first quarter of 2017.
Department Store cum Supermarket sub-sector suffered from another negative growth rate of 3.7% during the first quarter of 2017, as compared to the same period a year ago. This is the third consecutive quarterly decline.
After a strong recovery during the last quarter, Department Store sub-sector slid back to negative zone. The business of this sub-sector dropped by 0.1% during first 3-month period of this year.
Similarly, the Supermarket and Hypermarket sub-sector reported another worse-than-expected growth of -4.8% during the first quarter of 2017. This latest result is the worst among the retail sub-sectors.
After a strong recovery for most part of 2016, the business of Fashion and Fashion Accessories sub-sector turned red with a growth rate of -0.1%.
During the first 3 months of this year, Pharmacy and Personal Care sub-sector reported an encouraging growth rate of 3.7%, as compared to the same quarter a year ago. Among the retail sub-sectors, this is the best performer during this quarter.
The Other Specialty Stores sub-sector (including retailers selling photographic equipment with photo processing services, children-related goods, second-hand goods, toys, TV shopping as well as restaurants) reported a negative growth of 3.1% during the first quarter of 2017, as compared to the same period last year.
Next 3 months’ forecast
Members of the retailers’ association are hopeful that their businesses will pick up by the second quarter of 2017.
They projected an average growth rate of 4.8%.
After 3 quarters of declines, the department store cum supermarket operators are expecting a solid turnaround with a growth of 6.2% for the second quarter of this year.
Similarly, the department store operators are expecting their businesses to rebound strongly with a growth rate of 6.1% for the second 3-month period of this year.
On the other hand, supermarket and hypermarket operators are expecting a moderate recovery with 1.2% growth rate for the second quarter of 2017.
Retailers in the fashion and fashion accessories sector expect their businesses to recover strongly with a positive growth of 12.6% during the second quarter of 2017.
Retailers in the Pharmacy and Personal Care sub-sector are also optimistic of their businesses with a growth rate of 4.9% for the second quarter of 2017.
Retailers in Other Specialty Stores sub-sector (including retailers selling photographic equipment with photo processing services, children-related goods, second-hand goods, toys, TV shopping as well as restaurants) are pessimistic of their business prospects.
They expect their businesses to contract by 2.6% during the second 3-month period of 2017, as compared to the same period a year ago.
Second half of 2017
The projected retail sales growth rate of Malaysia retail industry in 2017 by Retail Group Malaysia is maintained at 3.9%.
The poor retail sale result during the first quarter will be offset by the higher projection of second quarter (4.8%).
The retail sale growth rates for third and fourth quarters are estimated at 5.0% and 5.5% respectively.
Trading condition remains tough for retailers during the second half of 2017. The challenges include higher cost of goods and rising operation costs for retailers.
The recovery of retail sales is highly dependence on external economic demand and ringgit performance for the rest of the year.
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