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Retailers fear current weakness in consumer spending

Retail sales typically slow in the second quarter of the year as consumers take a breather from spending after the festivities in the first quarter. As such, when retailers say their sales fell short of expectations during the two major festive periods so far this year, it is time to pay attention.

Ordinarily, following the lull in the second quarter, the cycle then picks up in the third and continues until it peaks in the fourth, when retailers hope to end the year stronger than the previous year.

Will this be the case this year given the weak ringgit and the planned fuel subsidy rationalisation up ahead, even though, on the flip side, the 1.4 million strong civil service is set to enjoy a big pay rise at year end?

Consumer spending during the recent Hari Raya season — a key barometer for retailers — was said to be a letdown. It was the same for the Chinese New Year celebrations earlier in the year.

Retailers say that even though the Covid-19 pandemic is behind us, the industry is still not enjoying the kind of consumer spending that was seen before the pandemic.

Retailers also say that although sales revenue might have improved, the number of sales transactions has declined. This can be partly attributed to inflation. But it is also worth considering whether wage growth has been quick enough to combat the rising prices.

Although some believe that the introduction of Account 3 by the Employees Provident Fund (EPF) could help to lift spending somewhat, retailers are not counting on it. In fact, they say what is important is that international tourists, especially those with high spending power, return to Malaysia.

Meanwhile, the EPF Flexible Account (or Account 3) will go live on May 11, giving pre-retirement account holders the liberty to withdraw up to 10% of their balances for any purpose. Will the withdrawals boost consumption? Fund managers foresee that it may not be to the extent that was observed two years ago when EPF proposed a special withdrawal scheme of up to RM10,000.

In addition, Prime Minister Datuk Seri Anwar Ibrahim has announced that civil servants will receive a salary increase of at least 13% starting December 2024. Will this boost consumer spending?


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