Malaysia Retail Industry Report

GST HOLIDAY SPURS 6% GROWTH FORECAST

For the first quarter of 2018, Malaysia retail industry recorded a below-than-expected growth rate of 2.6% in retail sales, as compared to the same period in 2017 (Table 1).

This latest quarterly result was lower than the estimate made by members of MRA at 5.4% in March 2018.
Despite poor performance recorded a year ago (-1.2% in Q12017), the Malaysia retail market remained subdued early this year. Shoppers were still careful in their spending on festive goods during the Chinese New Year period.
COMPARISON OF RETAIL SALES WITH OTHER ECONOMIC INDICATORS
For the first quarter of 2018, Malaysia national economy recorded a sustainable growth rate of 5.4% (Table 2, at constant prices), as compared to 2.6% for retail sales (at current prices).

Private consumption as well as export of goods and services were the main drivers of growth during this period.
The average inflation rate during the first quarter of 2018 slowed down significantly to 1.8%. The consumer price index recorded relatively higher rate in January (2.7%) but declined both in February (1.4%) and March (1.3%).
Prices of foods & non-alcoholic beverages continued to register the highest increases during the first 3 months of this year. On the other hand, transportation cost slid to negative zone from February of this year. Private consumption grew moderately by 6.9% during the first quarter of 2018.
During the latest quarter, the Consumer Sentiment Index (by MIER) climbed to 91.0. However, it was still below the 100-point threshold level of confidence. Unemployment rate during the first quarter of 2018 maintained at 3.3%.
NEXT 3 MONTHS FORECAST
Members of the retailers’ association are hopeful that their businesses will recover by the second quarter of 2018. They projected an average growth rate of 6.0% (Table 4). The change in ruling party after the general election on 9 May 2018 is expected to boost consumers’ confidence level and increase their willingness to spend. At the same time, the largest festival in Malaysia, Hari Raya, will be celebrated in June this year.

The department store cum supermarket operators are expecting a better performance with a growth of 4.6% for the second quarter of this year. The department store operators are expecting to sustain their businesses with a growth rate of 4.7% for the second 3-month period of this year.
On the other hand, supermarket and hypermarket operators will not see improvement in their business in the coming months. They expect to remain in the red zone with a -4.4% growth rate for the second quarter of 2018.
Retailers in the fashion and fashion accessories sector expect their businesses to improve further with a positive growth of 3.6% during the second quarter of 2018.
Retailers in the Pharmacy and Personal Care sub-sector are also optimistic of their businesses with a strong growth rate of 13.0% for the second quarter of 2018.
Retailers in Other Specialty Stores sub-sector (including retailers selling photographic equipment with photo processing services, sporting goods, children-related goods, second-hand goods, toys, baking ingredients as well as TV shopping) are
RETAIL SUB-SECTORS’ SALES COMPARISON
Except Supermarket and Hypermarket sub-sector, all retail sub-sectors recorded improvement (Table 3) in their retail businesses during the first quarter of 2018.

Except for Pharmacy and Personal Care sub-sector, all retail sub-sectors performed below the estimates made by members of MRA in March this year.
Department Store cum Supermarket sub-sector managed to sustain their business with a positive growth rate of 2.6% during the first quarter of 2018, as compared to the same period a year ago.
After two consecutive quarterly declines during the second half of 2017, Department Store sub-sector returned to positive zone. The business of this sub-sector increased by 4.6% during first 3-month period of this year.
The Supermarket and Hypermarket sub-sector continued to suffer from poor return with a growth rate of -3.8% during the first quarter of 2018. This latest result is the worst among the retail sub-sectors.
During the first quarter of 2018, the Fashion and Fashion Accessories sub-sector recorded a moderate growth rate of 2.8% after a strong performance during the year-end holiday last year.
During the first 3 months of this year, Pharmacy and Personal Care sub-sector reported a strong growth rate of 9.2%, 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, sporting goods, children-related goods, second-hand goods, toys, baking ingredients as well as TV shopping) reported a slower growth of 3.3% during the first quarter of 2018, as compared to the same period last year.
Most optimistic. They expect their businesses to climb by 18.1% during the second 3-month period of 2018.
SECOND HALF OF 2018
From 1 June 2018, the new Malaysian government has reduced the Goods and Services Tax (GST) from 6.0% to 0.0%.
Retail Group Malaysia has adjusted the second quarter retail growth rate from 3.7% (estimated in March 2018) to 6.3% (Table 5). This revision is also higher than the latest projection made by MRA members. This new estimate took into consideration the tax holiday during the last month (June) of second quarter as well as Hari Raya celebration at the middle of June 2018.

Many retailers, large and small throughout the country, have taken this once-in-a-life-time opportunity to offer great discounts to attract shoppers to buy. Higher expenditure from tourists, including Singaporeans, is also expected during this period.
The retail sale growth rate for third quarter has also been revised from 5.2% (estimated in March 2018) to 6.8%. This revision took into consideration the remaining 2 months of tax break before Sales and Services Tax (SST) is to be re-introduced from 1 September 2018.
For the last quarter of this year, the retail growth rate has been revised downwards from 5.0% (estimated in March 2018) to 3.5%. This lower adjustment is needed to reflect higher consumers’ spending during the 3-month period with zero-rated GST. Major purchases are expected to have been made from June to August of this year.
Based on the latest quarterly adjustments, the projected retail sale growth rate of Malaysia retail industry in 2018 by Retail Group Malaysia has been revised upwards from 4.7% (estimate in March 2018) to 5.3%.
For more information, please write to [email protected]

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