GST effects beginning to be felt


THE goods and services tax (GST) has seen its fair share of hiccups since its implementation on April 1, 2015, but the storm is far from over.

Although many had earlier anticipated that the following months will bring about a slowdown in retail spending, the real impact experienced by some businesses has been a lot higher. “There has easily been a decline of about 50% in sales for our European brands in April. We have taken a hard beating,” says a spokesperson from the automotive industry.

The spokesperson added that while there is still a lot of public interest in their models, many are resisting making the decision to purchase them.

“They are taking a wait and see stance, and they’re trying to assess the actual impact of GST on themselves before making the decision to buy. I think there will be a correction eventually, hopefully by next month with Hari Raya coming up.

“Our industry is not the only one facing this phenomenon. We know it is only temporary, but the scary thing is that we don’t know how long it will last,” the spokesperson says.

In a recent report, the Retail Group Malaysia (RGM) says it expected Malaysian consumers to buy earlier in the year in anticipation of higher retail prices after April 2015.

However, retail sales performance during the first two months of the year were below expectation.

“Malaysian consumers were confused by the different public messages on the prices of retail goods and services after March 2015,” it says.

For the first three months of 2015, retail sales growth rate is estimated at 3.8% compared with the same period a year ago.

Tomei Consolidated Bhd group managing director Datuk Ng Yih Pyng tells StarBizWeek that sales were 30% to 50% down in April compared to the same month last year. In the first week of April, the jeweller recorded a 70% decline in sales.

“In some of our outlets, sales were very minimal during the first week. There was not a lot of activity in our shops,” says Ng.

This is despite Tomei’s decision to absorb the 6% GST, he adds. “We have already absorbed it. Prior to April the gold price is the same as after GST came in. We did not increase by 6% to try and attract customers so they don’t feel the pinch, but even then, sales are not at similar levels to last year,” says Ng.

He adds that sales in March were good due to pre-GST demand. Ng foresees that the next few months will not be as good as the sentiment is “not too positive”. “It is worse than we anticipated,” he says.

Malaysia Retail Chain Association (MRCA) president Datuk Liaw Choon Liang says he the impact on retail sales was expected. “The whole market is very quiet, like we expected.

“Market performance has been impacted between 10% to 30% compared with last year,” he says.

He adds that consumers are now more careful when spending. “Overall, it is not promising. We expect that sales this month won’t be much different but hopefully come June, it’ll turn around,” says Liaw.

Businesses may have to be more aggressive in advertising and promotion campaigns during this softer period.

RGM, which tabulates quarterly retail data, says retail sales will likely slow down as consumers for the six-month period after April 2015, as they assume a ‘wait-and-see’ attitude on the prices of goods and services. For the second quarter of 2015, retail sales should expand by only 3.5%.

“After three months, Malaysian consumers should return to retail shops to buy more goods. The retail industry should grow by 4.8%. 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 says.

RGM revised the projected retail sales growth of the Malaysian retail industry in 2015 downwards for the second time, from 5.5% to 4.9%.

“The greatest challenge in 2015 for the retail industry in Malaysia is consumers’ spending,” it says.

The Malaysian Institute of Economic Research’s (Mier) consumer sentiments index dropped further by 10.4 percentage points to 72.6 in the first quarter of 2015, after declining 15 percentage points to 83 in the fourth quarter of 2014.

This was the third consecutive quarter of decline and the lowest reading in six years, which indicates that consumers are unenthusiastic about spending as they are wary about their future.

The survey by Mier also reported that consumers are concerned over their financial and employment outlook.

Due to the general rise in prices of goods and services after the GST implementation, RHB Research expects consumer spending to grow at a more moderate pace of 5.2% in 2015, compared with 7.1% in 2014, as consumers take on a more cautious tone.

“The volatility in retail fuel prices with an 11% reduction in RON95 in February followed by an increase of 14.7% in March will likely make consumers more careful in spending,” the research house said in a recent report.


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