TA Research maintained a positive outlook on consumer activity.
PETALING JAYA: The economy is expected to remain underpinned by resilient private consumption in the second half of 2025, despite a moderation in distributive trade momentum and global uncertainties, according to analysts.
While growth in the distributive trade index (DTI) softened slightly in May, economists projected that favourable labour conditions, targeted policy measures and a recent interest rate cut would continue to support household spending and cushion downside risks to gross domestic product (GDP) growth.
Malaysia’s DTI expanded by 4.1% year-on-year (y-o-y) in May 2025 to 163.3 points, easing from April’s 4.3% y-o-y growth.
Distributive trade sales rose 4.4% y-o-y, also moderating from 4.7% in the preceding month.
TA Research noted that the April-May DTI average of 4.2% y-o-y represented a marginal moderation from 4.3% y-o-y in the first quarter (1Q), suggesting “a normalisation in spending patterns following steady momentum”.
Nonetheless, the research house maintained a positive outlook on consumer activity, stating: “We maintain the view that private consumption will remain resilient, underpinned by a favourable labour market, steady income gains and benign inflationary pressures, all of which support household purchasing power.”
It added that Malaysia’s Asean Chairmanship in 2025 could provide an additional uplift through heightened international engagements.
“These activities could spur urban consumption, particularly within the hospitality, transport and retail sectors, creating a positive spillover effect on domestic demand,” it said.
TA Research forecasts private consumption expenditure (PCE) to grow by 4.7% y-o-y in 2Q25, slightly below the 5% y-o-y registered in 1Q25, due to a high base.
Consequently, it expects GDP growth to moderate to 4% y-o-y in 2Q25 from 4.4% y-o-y in 1Q25.
The recent 25-basis-point (bps) cut in the overnight policy rate (OPR) to 2.75% is expected to provide further stimulus.
TA Research said: “The recent 25-bps cut in the OPR is expected to reduce borrowing costs for households and businesses, making loans like mortgages, hire purchase and personal financing more affordable.”
It cited a historical precedent, stating that a similar cut in 2016 had lifted GDP and PCE modestly in the subsequent quarter.
BIMB Research, meanwhile, revised its 2025 distributive trade sales growth forecast downward from 6% to 5.2%, citing lacklustre motor vehicle sales.
Nonetheless, the firm remained upbeat on the wholesale and retail trade segments, maintaining growth projections of 5% and 6.6%, respectively.
