KUALA LUMPUR: Malaysia’s retail sales will likely grow 3.7% in 2017, slower than previously estimated 3.9%, as consumer sentiment remains weak amid rising cost of living in Southeast Asia’s third largest economy. The cut in forecast was the second of such revision by Retail Group Malaysia, a retail consulting firm, from an initial target of 5% retail sales expansion pace this year. The estimate follows a survey of members of Malaysia Retailers Association on their second quarter performance and outlook for the year. Retail sales grew 1.7% in 2016. “For the rest of this year, the rise of purchasing power will continue to fall behind the increase in prices of retail goods,” the consultant said. “More retail goods are expected to raise prices because of higher fuel prices in recent months.”
The latest revision comes despite a sharp rise in retail sales for the April-June quarter as Malaysian consumers continue to tread cautiously on discretionary spending and delay purchases of big ticket items to weather a rising cost of living. Retail sales grew 4.9% in the second quarter from a year earlier, data from Retail Group Malaysia showed, boosted by hefty price discounts across the country amid the Eid al-Fitr festive season. That compares with the 1.2% year-on-year contraction in the first three months. Although, the Consumer Sentiment Index, compiled by the Malaysian Institute of Economic Research, rose to 80.7 points in the second quarter, it was still below the optimism threshold of 100 points. Consumer sentiment will likely stay cautious this year before gradually improving next year, said CIMB Investment Bank’s analyst Kristine Wong. “GDP is strong… but it would probably be felt in the end of fourth quarter this year or first quarter next year,” she said. Supermarkets are feeling the brunt of the slowdown, she said. “Most businesses are quite negative and they are still expecting a tougher time ahead.” In the first half, retail sales grew 2.5% when compared to the same period last year. Members of the retailers’ association–which includes department stores operators AEON Co. (M) and Parkson Holdings–are “not optimistic on their businesses in the next three months” and estimate an average growth rate of 2.9% during the third quarter of 2017, the consultancy firm said.
