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Malaysia’s Retail Sector Surges With 7.8% Growth, Driven By Festivities, Consumer Spending

Malaysia’s retail sector has exceeded expectations with a robust growth rate of 7.8% in retail sales compared to the same period in 2023, according to the latest report from Retail Group Malaysia (RGM) released today.

The surge in retail sales was driven by various factors, including the festive seasons of Chinese New Year and Ramadan, extended school holidays, and the distribution of Sumbangan Tunai Rahmah (STR) to 8.2 million Malaysians. Additionally, increased tourist arrivals, attracted by favorable exchange rates and visa-free entry for Chinese visitors, contributed to the sector’s strong performance.

Despite these positive trends, challenges persist due to rising food prices and global geopolitical tensions, which have led to boycotts of certain international brands, affecting market dynamics.

Economically, Malaysia saw an overall growth of 4.2% in the first quarter of 2024, with retail sales experiencing a significant uptick of 7.8%. This growth was bolstered by strong consumer spending, increased investments, a stable labor market, and higher tourist numbers.

Key sectors such as services and construction expanded by 4.7% and 11.9%, respectively, while inflation averaged 1.7%, driven mainly by increased costs for dining out and utilities.

Private consumption grew by 4.7% during the quarter, supported by sustained spending on essential and discretionary items. However, consumer sentiment, as measured by the Malaysian Institute of Economic Research’s Consumer Sentiment Index, dipped to 87.1 points in the first quarter, reflecting concerns over rising living costs and future job prospects.

Despite a steady unemployment rate of 3.3%, with record high labor force participation at 70.2%, performance across retail sub-sectors varied significantly. Department stores combined with supermarkets saw robust growth of 12.3%, while standalone department stores recorded a 9.7% increase. Supermarkets and hypermarkets grew by 2.0%, and mini markets, convenience stores, and cooperatives expanded by 5.6%.

Fashion and fashion accessories led growth with a 12.6% increase, while children and baby products grew by 4.8%, and pharmacies by 8.2%. However, personal care products saw only a marginal growth of 0.4%, and sectors like furniture & furnishings, home improvement, and electrical & electronics declined by 2.1%.

The food and beverage (F&B) sector performed well, driven by festive celebrations and school holidays, despite challenges from higher food prices and boycotts affecting certain international F&B franchises due to global geopolitical issues.

Looking forward, cafe and restaurant operators anticipate a 7.3% growth in sales for the upcoming quarter, while food and beverage kiosks and stalls expect a slower 5.5% increase.

RGM initially projected a 4.0% growth in retail sales for 2024 but revised it down to 3.6%, citing a strong first quarter and moderate expectations for the second quarter. The sector continues to face challenges from the escalating cost of living and currency depreciation impacting imported goods prices.

The introduction of a 10% sales tax on online sales of imported goods since January 1 and an increase in service tax rates further influenced retail prices. The government’s decision to float diesel prices and initiate a subsidy program from June 10 is expected to impact transportation costs and retail prices.

With civil servant salaries set to increase by over 13% from December 1, with a minimum salary rise to RM2,000 per month, year-end retail sales are expected to receive a significant boost.

RGM projects a 2.5% growth in the retail sector for the third quarter and aims for a 3.2% increase in the fourth quarter following last year’s subdued performance.


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