Retail industry to remain good in first half


BY HANIM ADNAN

THE consumer and retail sector is expected to remain good in the first half of this year despite growing uncertainties in the retail sales outlook on the back of returning consumer confidence in view of expected economic expansion across the region. 

Industry players are optimistic that such factors as favourable economic and tourist arrival statistics this year will help boost local retail sales in the medium term. 

In addition, consumer sentiment during the period will be driven by brighter job prospects, high rural income arising from firm commodity prices, and the economy continuing to be healthy. Despite a forecast slower growth rate this year, Malaysia will still deliver one of the highest economic growth rates in the region.  

For the first half of this year, industry players have pegged retail sales at RM25bil to RM30bil.  

MasterCard International, in its latest retail forecast, sees retail sales in the first half of this year growing 8.9% year-on-year to an estimated RM30bil. 

Its economic adviser for the Asia Pacific, Dr Yuwa Hedrick-Wong was quoted as saying: “The consumption revolution in the Asia Pacific continued to unfold in 2005, despite the tsunami disaster, the impact of higher world oil prices and the regional trend of higher interest rates.” 

Customers at Ipoh Jusco Supermarket's wet section. For the first half of this year, industry players have pegged retail sales at RM25bil.

He added that retail sales would benefit from the growing trend of travellers cum shoppers, a uniquely “Asia Pacific phenomenon” with key tourist destinations such as Hong Kong, Singapore, Bangkok, Kuala Lumpur, Shanghai and Seoul seeing higher tourist arrivals, boosting retail sales and the small- and medium-size businesses that cater to tourists. 

Meanwhile, the Malaysia Retailers Association (MRA) has forecast retail sales to grow by 8% to RM55.6bil this year on the back of the official gross domestic product (GDP) forecast of 6%. 

For the full year 2004, the MRA has raised its sales growth forecast to 7.7% from 7.5% earlier following an 8.8% retail sales growth in the third quarter of last year and final quarter sales projected to expand by 8%. 

The fairly commendable third quarter 2004 retail sales growth of 8.8% was no surprising as the quarter coincided with a six-week Mega Sales Carnival and record tourist arrivals, which grew 51.5% year-on-year for the period July-September 2004. 

Retail and consumer products players will likely suffer margin pressures in view of heightened competition while constrained by rising costs.

“We believe what prompted the MRA to revise its full-year 2004 sales projection was the brisk sales recorded by its members in fourth quarter 2004, thanks to consumer optimism, stock market gains and payment of year-end bonus, which drove festive sales in November and December,” said Mayban Securities.  

The research unit's forecast for this year’s retail sales growth was a more moderate 7%, based on projections of GDP growth of 5.2% , and in-bound tourist arrivals of 16 million spending about RM32bil in total. 

Retail Group Malaysia Sdn Bhd (RGM), which tabulates data for the MRA, expects retail sales to outgrow GDP by between 1% and 3% from 2005 to 2007.  

Its managing director, Tan Hai Hsin, had said recently that retail sales were expected to chalk up a year on year growth of 8% for each year in that period.  

“This means that from an estimated RM51.5bil in sales last year, retail sales – excluding big-ticket items such as cars and houses – are forecast to reach RM69.92bil in 2007,” he said, adding that the catalysts to boost sales included stronger consumer spending, given the healthy overall economy.  

For full-year 2004, RGM estimates retail sales to expand by 7.7%, compared with 3.6% in 2003.  

However, corporate think-tank Malaysian Institute of Economic Research's (MIER) business conditions and consumer sentiments survey findings suggest that the economy would ease in the final quarter of last year and early this year. 

MIER’s Business Conditions Index, which tracks confidence in the business sector, dipped 12.9 points to 97.3 in the final quarter last year on expectations of a slowdown in global and domestic economy and higher energy and toll prices.  

Its Consumer Sentiment Index (CSI) dropped 4.6 points to 109.3.  

MIER said: “Although the CSI is lower, the index remains above the 100-point demarcation line, which means that consumer confidence is still holding up.” 

In addition, the impact of the tsunami disaster on business and consumer confidence, was not fully reflected in both indices as the tragedy occurred in late December, when the surveys were about to conclude.  

MIER expects Malaysia's economy to grow at 5.7% this year, down from an estimated 7.2% last year.  

 

For the full report from MIER click here

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