The retail industry has shown slight improvement in the months of April to June, as compared to the first three months of the year, with the Hari Raya festival in May boosting retail sales.
The Retail Group Malaysia reports in its latest Malaysia Retail Industry Report that in the second quarter of 2017, Malaysia’s national economy recorded another sustainable growth rate of 5.6% as compared to 4.9% for retail sales, supported by domestic demand.
“From the supply side, the improvement was driven by broad-based expansion across all major sectors,” said the report.
The average inflation rate during the period under review slowed slightly to 4% with the two largest increases seen in the transport and food and non-alcoholic beverages sectors. This was mainly owing to a falling fuel prices.
Private consumption climbed even higher by 7.1% with consumers spending more on dining out, services and Internet shopping.
“During the latest quarter, the Consumer Sentiment Index (by MIER) improved slightly to 80.7. However, it was still below the threshold level of confidence. Malaysian consumers were still concerned on their rising cost of living and remained cautious in their monthly spending,” said the report.
The unemployment rate improved marginally to 3.4%.
Among the retail sub-sectors, the department store sub-sector was the strongest performer in the second quarter with a strong growth rate of 15.1%. The department store-cum-supermarket sub-sector also rebounded with a growth of 4.1% after a poor performance in the earlier quarter.
The supermarket and hypermarket sub-sector improved slightly by 0.8% with heavy price discounts by grocery retailers depleting profit margins.
The fashion and fashion accessories sub-sector returned to profitability with a growth rate of 2.5% as compared to the previous corresponding period.
The pharmacy and personal care sub-sector also improved on-year with a growth rate of 7.9%.
The Other specialty stores sub-sector reported a better growth rate of 6.3% during the second quarter of 2017 as compared to the same quarter last year. This sector includes photo shops, children-related stores, second-hand goods’ stores, TV shopping channels, toys’ stores as well as restaurants.
The Retail Group Malaysia reports that the retailers’ association are not optimistic on their businesses over the next three months. They estimate an average growth rate of 2.9% in the third quarter of 2017.
The department store-cum-supermarket operators and department store operators are expecting declines in their growth rates of 2.5% and 1.5% respectively.
Supermarket and hypermarket operators are expecting to maintain a 0.8% growth rate for the quarter, while retailer in the fashion and fashion accessories sector expects a growth rate of 6.1%.
Retailers in the pharmacy and personal care sub-sector expect to maintain growth at 7.2% while retailers in other speciality stores sector expect its business to expand by 5.6% over the same period last year.
Based on these results, Retail Group Malaysia is revising its annual growth forecast downwards from 3.9% to 3.7% with the total sales turnover estimated at RM101.4bil.
The third quarter growth rate estimate has also been revised from 5% to 4%.
Retail Group Malaysia is maintaining its fourth quarter growth rate estimate at 5.5%, taking into consideration the 0.3% growth achieved in the same period last year.
“For the rest of this year, the rise of our purchasing power will continue to fall behind the increase in prices of retail goods. More retail goods are expected to raise prices because of higher fuel prices in recent months.
“The full recovery of the Malaysian retail market is highly dependent on external economic demand and ringgit performance for the rest of the year,” it said in its report.