PETALING JAYA: Malaysia’s retail sector remained resilient in November 2024, as reflected in the latest distributive trade index (DTI) data, but analysts noted potential headwinds ahead.
The Department of Statistics Malaysia reported a 3.9% year-on-year (y-o-y) growth in the DTI for November, reaching 158.8 points, although this represented a slowdown from the 5.1% y-o-y growth recorded in October. On a year-to-date basis, the DTI averaged a 4.4% y-o-y increase for the first 11 months of 2024.
Retail sales continued to lead the distributive trade sector, posting a robust 5.8% y-o-y increase to RM64.8bil in November, according to BIMB Research.
“Malaysia’s distributive trade sector recorded total sales of RM149.3bil in November 2024, marking the second-highest monthly sales of the year,” the brokerage noted.
BIMB Research highlighted the resilience of consumer demand, attributing growth to robust online sales driven by events such as the 11.11 Singles’ Day, which bolstered e-commerce activity.
Retail sales over the Internet rose 5.2% y-o-y, slightly higher than October’s 5.1% growth. However, BIMB cautioned about a seasonally adjusted month-on-month decline of 4.3% in the index.
TA Research observed that November’s performance underscores the importance of personal spending as a key driver of Malaysia’s economic growth.
“This consistent growth in the DTI indicates that personal spending will remain a key driver of overall gross domestic product (GDP) growth in the fourth quarter. Consequently, we maintain our forecast for personal spending growth at around 5% y-o-y in the fourth quarter (4Q) of 2024, a slight improvement from the 4.8% y-o-y growth recorded in 3Q24,” the research house stated.
However, it warned that overall GDP growth would be tempered by external headwinds, including subdued external demand and challenges in the manufacturing and mining sectors.
Looking ahead to 2025, TA Research projects private consumption growth of 6.3%, driven by a resilient labour market, stable income expansion and contained inflation. It noted potential tailwinds from higher civil servant salaries and increased tourist arrivals benefiting the retail, food and leisure segments.
However, the rationalisation of RON95 fuel subsidies could pose challenges by increasing fuel costs and reducing disposable income for lower and middle-income households.
“The overall impact will hinge on the timing and scale of subsidy adjustments, as well as the effectiveness of targeted financial aid programmes aimed at protecting vulnerable groups,” it said.
MIDF Research shared a positive outlook for the retail sector in 2025, forecasting a 5.2% growth in retail trade, supported by increased employment, rising incomes, higher civil servant salaries and a higher minimum wage.
“For full-year 2024, we maintain our forecast that retail sales will grow at 5.8% as inflation and the labour market remain stable,” it said.
MIDF added that the retail sector would benefit from continued recovery in tourist arrivals and government cash assistance. However, it flagged higher cost-push inflation as a potential constraint on consumer spending.
BIMB Research echoed this optimism, projecting sustained growth for Malaysia’s private consumption and services sector in 2025 at 5.4%, driven by favourable labour market conditions and increased tourism activities.
“Phase 1 of the civil servant salary revision effective December 2024 and an increase in the minimum wage from RM1,500 to RM1,700 per month are expected to bolster consumer spending,” it noted.
CIMB Research provided a broader economic perspective, expecting Malaysia’s GDP growth to remain supported at 5% in 2025, consistent with the government’s target range of 4.5% to 5.5%. It attributed this projection to strong domestic spending, robust investments and a recovery in external demand, driven by the global tech upcycle.
However, it warned of rising downside risks, including heightened global inflationary pressures and potential escalations in trade tensions.
“These factors may lead to global central banks adopting a more cautious approach to rate cuts, potentially dampening growth prospects,” the brokerage said.
