KUALA LUMPUR: Malaysia Retailers Association (MRA) have lowered the projected retail sales growth rate in 2015 for the third time from 4.9% to 4.0% as consumers hold back their spending due to higher costs of living, a weak Ringgit and higher cost of doing business.
In its Malaysia Retail Industry Report issued on Thursday, MRA said consumers had been holding back on spending since end of 2014 ahead of the Goods & Services Tax (GST), which was imposed on April 1 this year.
“Further increases in cost of living in the near future will worsen it. Higher transportation costs as well as increased retail prices due to weak Ringgit and higher costs of doing business are expected in the second half of this year,” it said.
The MRA said retail sales grew 4.6% in the first quarter of 2015 (Q1, 2015) and turned negative –3% in Q2 and it expects a recovery in Q3 with growth of 4.8% and pick up to 6.9% in the final quarter. For the whole, year, growth is expected to be 4% only.
The trade body expressed hope Malaysian consumers would return to retail shops to buy more goods during the third quarter of 2015. It expects the retail industry to grow by 4.8% during this period.
“Malaysian consumers will get used to the GST by the last quarter of 2015. Retail spending will return to normal again by this period. This industry is expected to recover strongly with a 6.9% growth rate,” it said.
The MRA said in Q1, 2015, the retail industry saw an encouraging growth rate of 4.6% in retail sales, which a rebound from a contraction of 0.8% in the October-December of 2014.
While the Q1, 2015 growth of 4.6% was higher than the Retail Group Malaysia’s expectations of 3.8%, this was lower than the average growth rate of 5.8% forecast by members of MRA in March 2015.
MRA said the introduction of GST from April 2015 was supposed to stimulate consumption during the first quarter of this year. However, Malaysian consumers were holding back on their spending due to the uncertainty with the implementation of GST.
Retail sales performance in January and February was below expectations despite the Chinese New Year festival, bonuses and the distribution of BR1M 4.0 to 7.2 million Malaysians.
It noted Malaysian consumers were confused by the different public messages on the prices of retail goods and services after March 2015. Malaysians were hesitant to spend more despite lower petrol prices and electricity charges.
However, consumer spending rose sharply during the last two weeks of March. This was because of more announcements made by private sector on the prices of retail goods and services from April 2015.
The MRA pointed out consumers took advantage of the retail offers in anticipation of price increase after the implementation of GST. Retailers of big-ticket items were also clearing their old stocks aggressively with large discounts.
It also noted the retail sales grew at a slower pace of 4.6% in Q1, 2015 compared to overall GDP growth of 5.6%.
The other specialty stores sub-sector reported a 7.8% decline in retail business in Q1, 2015 from a year ago, which was much steeper than in Q4 of 2014 (-6.7%) and growth of 3.5% a year ago. It projects a contraction of 12.6% in Q2, 2015.
These stores include retailers selling photographic equipment with photo processing services, sports-related goods, children-related goods, second-hand goods, health and fitness equipment as well as toys.
Department store cum supermarkets reported stronger 14.7% growth (Q1, 2015) from 7.9% (Q4, 2014) and 6.8% growth a year ago. But for the Q2, 2015, it sees slower growth of 3.7%.
After a short recovery of a 7.9% growth (Q1, 2015), the department store operators expect business to return to red of -14.9% (Q2, 2015).
As for the supermarket and hypermarkets segment, which are selling mainly basic necessities, they recorded stronger growth of 5.1% (Q1, 2015) from 1% growth (Q4, 2014) but MRA sees this sector reversing into the red with a contraction of –1% in Q2, 2015.
Retailers in the fashion accessories sector, which recorded a 2.2% decline in Q4, 2014, reported a rebound 4.5% (Q1, 2015) but they are bracing from a decline in Q2, 2015 (-2.1%).
The furniture and electrical and electronics saw a 24.5% growth (Q1, 2015) ahead of the implementation of the GST in April but expect growth declining to 7.1% (Q2, 2015).