PETALING JAYA: The Retail Group Malaysia (RGM) has revised down its growth rate estimate in retail sales for the fourth quarter of 2023 (4Q23) from the initial 3% in September 2023 to a more conservative 2.1%.
This downward revision is in-line with the 2.1% year-on-year (y-o-y) growth prediction by the Malaysia Retailers Association (MRA) and Malaysia Retail Chain Association (MRCA) for the same period, highlighting a more cautious outlook by RGM.
RGM said the persistent increase in food prices during 4Q23 is a significant factor impacting the costs of both home cooking and dining out.
The resulting higher cost of living is anticipated to have adverse effects on the purchasing power of Malaysian consumers.
However, RGM said shopping traffic during 4Q23 is expected to be similar to the 2022 level, with Malaysian consumers still spending.
“The holiday sales will not be the same as the pre-Covid level due to the shortened school holiday.
“For this year, the year-end school holiday is only two weeks,” it said in an industry report yesterday.
RGM said for 3Q23, the local retail industry achieved a growth rate of 2.7% in retail sales, compared to the same period in 2022.
RGM said this surpassed the projections made by MRA and MRCA, which had anticipated a 3Q23 growth rate of 1.4% in their September 2023 forecasts.
However, RGM said although shopping traffic had returned to pre-covid levels, spending power had been weakened due to the higher cost of living.
“Although the average inflation rate eased during the third quarter, the prices of many basic necessities and consumer goods were higher as compared to the pre-lockdown period,” it added.
It is worth noting that during 3Q22, the retail industry expanded by 96%, the highest quarterly growth rate achieved in the history of Malaysia’s retail industry, due to re-opening of retail businesses after two years of lockdown.
Meanwhile, RGM pointed out that the weak local currency during the quarter had led to another round of price increases due to higher import costs of raw materials, semi-finished goods and finished retail goods.
Additionally, high-interest rates have caused Malaysian homeowners to contend with higher monthly instalments, according to the report.
As a consequence, RGM suggests that many Malaysians have deferred the purchase of high-value consumer goods.
During 3Q23, various retail sub-sectors showed mixed performances.
The mini-market, convenience store and cooperative sub-sector stood out with a robust 11.1% growth in retail sales.
The pharmacy sub-sector reported a robust growth rate at 9.6%, while the department store-cum-supermarket sub-sector saw a decline of 2.4%.
Similarly, the department store sub-sector faced a 6.5% decrease; and the supermarket and hypermarket sub-sector had a slight dip of 0.5%.
Unfortunately, the furniture and furnishing, home improvement and electrical and electronics sub-sector experienced the worst performance with a negative growth rate of 11.9% in 3Q23.
For the first nine months of the year, Malaysia’s overall retail industry expanded by 3.3%.
Looking ahead, RGM noted that department store operators expect a positive growth rate of 9.3% in the last three months of this year.
Supermarket and hypermarket sub-sectors foresee a flat growth rate, expanding by only 1.1% in 4Q23.
Mini-market, convenience store and cooperative operators anticipate a sustainable growth rate of 8.1%.
However, pharmacy operators may experience a slowdown with a growth rate of 0.8% in 4Q23.
In September 2023, RGM initially estimated a 2.7% growth rate in retail sales for 2023.
However, based on the latest retail results, this projection has been revised slightly upwards to 2.8%.
Looking ahead to 2024, RGM forecasts a 3.5% growth rate for the Malaysia retail industry.
Similar to the current year, the rising cost of living remains a significant challenge for the Malaysian retail industry in the new year, RGM said.