Retail industry tipped to grow 8% this year

KUALA LUMPUR: Malaysia’s RM60bil retail industry may grow 8% this year as an expanding economy, rising stocks and a strengthening currency encourage spending, said Retail Group Malaysia.  

“Broad-based economic growth, not just specific sectors such as primary commodities, oil and gas, telecommunication, will help to improve the spending power of consumers,” said Tan Hai Hsin, managing director of Retail Group, which conducts quarterly retail surveys for the Malaysian Retailers Association.  

Sales at retailers in Malaysia including Aeon Co (M) Bhd and Isetan of Japan Sdn Bhd probably rose 7.5% last year to RM58.98bil after growing 6.2% in 2005, according to a survey by the Malaysian Retailers Association released in October. The association has not released its latest estimate for 2006 sales.  

The Government said in September it expects the economy to grow 5.8% in 2006 and to expand 6%this year.  

“The recent strong performance of the Kuala Lumpur Composite Index as well as the strengthening of the ringgit should make Malaysian consumers feel good about future prospects for themselves, their jobs and their country,” Tan said. “Hopefully, this will start to encourage them to be willing to spend more.”  

Still, rising living and business costs may affect consumer spending and profit margins at retailers, Tan said.  

“Consumers will continue to tighten their purse strings,” said Wong Lai Yee, an economist at TA Securities Holdings Bhd.  

The Malaysian Institute of Economic Research’s retail trade index rose 4.2 points to 99.2 in the fourth quarter from the previous three months, the think tank said last month. Still, it was the fourth quarter the index was below the 100-point mark.  

“Market conditions remain weak,” the institute said in a report. “A moderating economy, intense retailer competition, high interest rates and cautious consumption spending should continue to cast a pall on the retail sector.”  

Malaysia’s economic growth may slow to 5.2% this year from 5.9% in 2006, the institute said. Exports grew a less-than-expected 6.2% in December as overseas demand for the nation’s products faltered amid easing US growth.  

Malaysia should follow China and Singapore in cutting fuel charges “as soon as possible,” which would ease the burden of most consumers, Tan said. – Bloomberg

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