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Malaysia: Consumer spending to continue growing
PETALING JAYA: Consumer spending in Malaysia is set to stay on an upward trajectory this year, underpinned by significantly high vaccination rate, improving labour market, fiscal incentives and stable inflationary pressure.
MIDF Research said it expects private consumption and the services sector to contribute positively towards gross domestic product in the fourth quarter (Q4) of 2021.
“The three-month moving average of distributive trade sales was 5.1% higher year-on-year (Q3 2021: 9.1% drop year-on-year or y-o-y) for the final quarter of 2021,” it said in a note.
It said that in December 2021, Malaysia’s distributive trade sales growth was 3.5% higher y-o-y, led by motor vehicles (1.5% higher y-o-y), wholesale (4.1% higher y-o-y) and retail (3.5% higher y-o-y).
MIDF Research also expects the unemployment rate to hover below 4% in the second half of 2022 and average at 4% this year.
The research unit noted that in December 2021, the jobless rate had hit a new pandemic low of 4.2%, as the number of unemployed persons fell below 700,000 for two consecutive months since November 2021.
Employment growth in December 2021 reached a seven-month high at 2.8% growth y-o-y, thanks to continuous expansion in both export-oriented and domestic-focused industries.
Also, inflationary pressure is predicted to trend lower following receding low-base effects from fuel inflation, especially with retail fuel prices to remain status quo.
“Cost-induced pressures are set to ease off, given that leading indicators on supply constraints are showing moderating patterns,” said MIDF Research.
It added that steady employment growth and stable inflationary pressure are key fundamentals to benefit and support Malaysia’s consumer spending in the fourth quarter of 2021 as well as for 2022.
The research unit also expects the country’s retail trade to expand by 5.5% and private consumption to expand by 6% this year with the relaxation of containment measures, economic re-opening and progressive improvements in macroeconomic data, setting the stage for strong consumer spending.
With interstate travels allowed, MIDF Research also projected services sector to benefit and increase by 7.1% this year.
Meanwhile, should Malaysia’s international borders be re-opened on March 1, this will be an additional catalyst for the services sector via tourism activity.
However, MIDF Research does not expect borders to reopen fully in the first half of this year as the Health Ministry had forecast daily infection cases to peak at 22,000 by the end of next month.
Additionally, the vaccine rollout for children aged five to 11 years old had just started in February and they may take at least one-and-a-half months to be fully vaccinated.
Meanwhile, retail spending patterns are expected to shift slightly from pre-pandemic years, especially on information and communications technology (ICT) and household items, thanks to remote working and learning arrangements.
“We observed that spending on non-specialised stores for groceries shopping fell in terms of distributive trade sales share to 14.9% in 2021, from a peak point of 15.3% in 2020.
“As consumers adapted to the new normal, expenditure on ICT products rose to a record high at 4.2% of total distributive trade sales,” said the research unit.
This year, automotive fuel share is also expected to rebound to its pre-pandemic level at 3.4% (2021: 3.1%) with interstate movements allowed.
Source: https://www.thestar.com.my/business/business-news/2022/02/10/consumer-spending-to-continue-growing