KUALA LUMPUR: Malaysia's retail industry achieved a better-than-expected growth rate of 2.7 per cent in retail sales in the third quarter of 2023 compared to the same July-September period in 2022.
Retail Group Malaysia (RGM), in its latest November industry report today, said the performance was above market expectation.
It said members of Malaysia Retailers Association (MRA) and Malaysia Retail Chain Association (MRCA) had projected the third quarter growth at 1.4 per cent.
During the same period a year ago, the retail industry expanded by 96.0 per cent due to re-opening of retail businesses after a two-year of lockdown.
This growth was the highest ever recorded in the history of Malaysia's retail industry.
The comparatively lower growth rate in the current quarter is partially due to the high base effect from a year ago, RGM explained.
Although shopping activity returned to pre-Covid-19 levels, the spending power was weak, resulting from a higher cost of living.
Despite a decrease in the average inflation rate during the third quarter, the prices of essential goods were higher than the pre-lockdown period.
The weak ringgit during the quarter led to additional price increases due to higher import costs for raw materials, semi-finished goods and finished retail products.
RGM said the relatively high interest rates prompted Malaysian homeowners to pay higher monthly installments, causing many to postpone purchases of high-value consumer goods.
For the first nine months, Malaysia's retail industry expanded by 3.3 per cent compared to the same period in 2022.
In September, RGM estimated a 2.7 per cent growth rate in retail sales for 2023. Based on the latest results, the projection has been slightly revised upwards to 2.8 per cent.
However, the growth rate estimate for the fourth quarter of 2023 has been adjusted downwards from 3.0 per cent (as estimated in September 2023) to 2.1 per cent.
The ongoing rise in food prices during the last quarter of this year has affected both the cost of cooking at home and dining at restaurants, it said.
The higher cost of living is expected to continue negatively impacting the purchasing power of Malaysian consumers.
The Israel-Hamas war that began in early October 2023 has led to boycotts of many Western brands with alleged links to Israel or purportedly pledging support to it.
As a result, Malaysian consumers are avoiding these retail stores and brands, affecting certain businesses while leading to increased support for Malaysian and other Asian brands.
Shopping traffic for the last three months of the year is anticipated to be similar to the 2022 level, with Malaysians still spending.
However, holiday sales are not expected to reach pre-Covid-19 levels due to a shortened school holiday, lasting only two weeks this year.
Members of the two retailers' associations project an average growth rate of 2.1 per cent for the fourth quarter of 2023, lower than the estimate by RGM at 3.0 per cent in September 2023.
Department store cum supermarket operators expect their performance to remain in the red zone with a negative growth rate of 1.7 per cent for the fourth quarter.