MIDF Research said Malaysia’s retail trade maintained a robust pace, growing 5.5% year-on-year in September 2024 to RM64.4bil.
PETALING JAYA: The consumer sector continues to experience strong tailwinds from the recovery in tourism, which has driven a significant increase in consumer demand, according to MIDF Research.
Citing data from Tourism Malaysia, it said international tourist arrivals surged to 18.4 million in the first nine months of 2024, compared to 14.5 million in the same period of 2023, underscoring the robust momentum following eased travel restrictions.
“We believe this sustained rise in visitor numbers will continue to fuel growth in tourism-related spending, which has been a crucial driver for consumer-facing industries, particularly within the food and beverage (F&B) and retail segments,” it added in a report.
It noted that Malaysia’s retail trade maintained a robust pace, growing 5.5% year-on-year (y-o-y) in September 2024 to RM64.4bil.
This brought cumulative consumption to RM569.3bil in the nine-month period of 2024 – up from RM536.4bil in the same period of 2023.
This expansion was mainly supported by strong demand in F&B, tobacco and non-specialised stores.
Resilient labour market conditions further supported retail sales, with the unemployment rate steady at 3.2% and the labour force participation rate inching up from 70.4% in August 2024 to 70.5% in September 2024.
Additionally, headline inflation moderated to 1.8% y-o-y in September 2024, which bodes well for consumer purchasing power, said the research firm.
“Moving into 2025, we expect the upward momentum in retail sales to persist, aided by stable employment, easing inflation and increases in disposable income from government measures such as enhanced cash handouts, the minimum wage hike and salary increments for civil servants.
“Additionally, the gradual tourism recovery is anticipated to further fuel retail demand, benefiting consumer staples and general merchandise retailers.”
Meanwhile, October 2024 commodity trends presented a mixed outlook for Malaysia’s food producers, with notable price fluctuations across key inputs such as cocoa, arabica and robusta. This could exert cost pressure on chocolate and coffee producers.
On the other hand, other critical inputs like wheat, sugar and polyethylene terephthalate resin (used for various applications) have seen declines, potentially lowering input costs for staple goods and packaging.
“This overall softening in select commodity prices is expected to help food producers like Hup Seng Industries Bhd
and Nestle (M) Bhd balance cost pressures.
“Nestle, in particular, benefits from its strong brand equity and pricing power, enabling it to manage increased cocoa costs without significantly impacting demand.”
As for the poultry segment, MIDF Research said declining feed costs provide tailwinds for poultry producers.
“Feed costs, a major component of poultry production expenses, have been steadily falling since early 2024, largely due to stable prices for key ingredients like corn and soybean meal.
“The lower feed costs are set to improve profit margins across the poultry industry and we remain optimistic that prices for these commodities will stay low in 2025, thanks to ample supply from leading exporters.”
In October 2024, the average exchange rate stood at RM4.30 per US$1, indicating a weaker ringgit compared to September 2024’s RM4.26 per US$1.
On the weakening ringgit in October, MIDF Research said it posed a risk to all F&B and poultry players who sourced commodities in US dollars.
However, it anticipates this impact to be mitigated by recent global commodity price normalisation, which has helped stabilise input costs.
Looking forward, MIDF Research’s economists project the ringgit to strengthen in the coming months, ending the year around RM4.03 to the dollar.
