Members of Malaysia Retailers Association (MRA) were interviewed on their retail sales performances for the second quarter as well as the rest of 2018. Here are the findings..
LATEST RETAIL PERFORMANCE
For the second quarter of 2018, Malaysia’s retail industry reported a growth rate of 2.1% in retail sales, as compared to the same period in 2017 (Table 1).
This latest quarterly result did not meet market expectations.
Members of MRA projected the second quarter growth rate in June 2018 at 6.0%. Retail Group Malaysia’s estimate for the same period was 6.3%.
Thus, the latest result was at least 65% below market expectations.
During the month of June, the Goods & Services Tax (GST) was reduced from 6.0% to 0.0%.
Hari Raya was also celebrated during the same month. In addition, school holidays, World Cup and Father’s Day took place during this period. These occasions should have brought exceptional sales results for many retailers.
However, Malaysian consumers did not go all out to spend on all kinds of retail goods mainly because they did not have extra income to do so.
For the month of June 2018, increase in sales varies among retailers. Some retailers enjoyed 30% increase in business, while others only 10%.
Some did not see improvement in sales and some even suffered from negative growths in sales.
Increase in sales varied among retailers, depending on the additional offers given by retailers.
High value-added retail goods (such as luxury items, sporting goods, electrical goods, electronics goods, gadgets and furniture) enjoyed higher sales as compared to basic necessities, household goods and general fashion items.
For the first 6 months of this year, the retail sales growth rate was 2.3%, as compared to the same period a year ago.
COMPARISON OF RETAIL SALES WITH OTHER ECONOMIC INDICATORS
For the second quarter of 2018, Malaysia’s national economy recorded a slower growth rate of 4.5% (Table 2, at constant prices), as compared to 2.1% for retail sales (at current prices). Growth was driven by private sector spending.
During the second 3-month period of this year, sale of Pharmacy and Personal Care sub-sector increased by 5.9%, as compared to the same quarter a year ago.
The Other Specialty Stores sub-sector (including toys’ stores, sporting goods’ retail stores, optical stores, photo shops, second-hand goods’ stores, TV shopping channels as well as retail stores selling baking ingredients) reported a strong growth rate of 11.5% during the second quarter of 2018, as compared to the same period last year. This is the best performer among the retail sub-sectors.
NEXT 3 MONTHS FORECAST
Members of the Retailers Association maintain their optimism on their businesses for the next three months.
They estimate an average growth rate of 6.1% during the third quarter of 2018 (Table 4).
The last two months of the tax holiday should encourage Malaysian consumers to spend more as we expect prices of retail goods to increase after that.
The department store cum supermarket operators expect their businesses to improve further with 6.0% in growth rate for the third quarter of this year.
The department store operators are expecting their businesses to rebound with a positive growth rate of 7.1% for the third 3-month period of this year.
Supermarket and hypermarket operators are expecting to stop their continuous decline with a near-zero growth rate of -0.2% for the third quarter of 2018.
Retailers in the fashion and fashion accessories sector expect their businesses to grow at a faster pace with a growth rate of 5.1% during the third quarter of 2018.
The average inflation rate during the second quarter of 2018 slowed down to 1.3%.
During the month of June, inflation rose by 0.8% only. This was the first time in 40 months that inflation recorded a value below 1.0%. The reduction of GST to 0% was the main reason for the low prices.
REST OF YEAR
With consideration of the latest market performances, Retail Group Malaysia has revised the retail sales growth rate for the third quarter from 6.8% (estimated in June 2018) to 6.1% (Table 5).
This revision took into consideration the remaining two months of tax break before Sales and Services Tax (SST) was re-introduced from 1 September 2018.
The main bulk of purchases were made during the last week of August.
This was especially so for high value-added retail goods. Malaysian consumers rushed to retail stores to buy more in order to save more.
For the month of September, many retailers maintained their prices in order to attract shoppers to buy.
For the last quarter of this year, the retail growth rate has been revised upwards from 3.5% (estimated in June 2018) to 4.3%.
This higher adjustment took into consideration the shopping behaviour and patterns during the 3-month tax holiday and the current economic environment.
Based on the latest quarterly adjustments, the projected retail sales growth rate of Malaysia retail industry in 2018 by Retail Group Malaysia has been revised downwards from 5.3% (estimated in June 2018) to 4.1%.
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