KUALA LUMPUR: Weak consumer sentiment is expected to prevail throughout 2024 as consumers are forced to prioritise essential spending over discretionary ones.
Maybank Investment Bank Bhd (Maybank IB) said elevated stapled food and beverage (F&B) costs and rising household expenditure will slow down consumer spending.
The implementation of new taxes this year will also exacerbate adverse impacts to consumption habits.
"The cumulative effect from an increase in sales and service tax to 8.0 per cent (from 6.0 per cent previously), possibility of water tariff hikes, rollbacks in petrol/diesel subsidies, and the recent introduction of the low-value goods tax effective Jan 1 will only put added pressure on overall consumer disposable income," it said in a note.
Maybank IB cited data from the Department of Statistics Malaysia which showed that the historical expenditure allocation pattern for an average Malaysian consumer mostly comprises housing, utilities, water, and gas, food and beverage, restaurants and accommodation, and transport.
"Staple food prices are expected to remain elevated in 2024 and we do not discount further price increases as operating challenges persist, in the form of higher labour and utility costs, and raw material price fluctuation for the domestic food manufacturers. "With this, consumers' wallet share may inevitably shift towards basic food necessities and away from other discretionary spending in 2024."It added.
Retail sales annual growth has been gradually declining since its peak of 38 per cent year-on-year (YoY) in July 2022 to between 5.0 per cent to 6.0 per cent YoY from May 2023 onwards.
"Without any significant catalyst to boost spending amid ongoing cost inflationary pressures, the consumer retail public listed companies under our coverage may post slower sales volume growth in 2024," it said.
Maybank IB maintained a 'Neutral' call on the consumer sector with a 'Buy" call for Farm Fresh Bhd.
Farm Fresh is expected to have strong topline growth on resilient product demand along with margin expansion from a steep decline in its whole milk powder average selling prices.