KUALA LUMPUR: Private consumption and services sector to grow at 6.3 per cent and 5.3 per cent respectively for 2017, and the continuous solid performance of distributive trade in July signals stronger domestic spending is in play, said MIDF Research.

The research house said this will also be supported by the strengthening labor market and upbeat momentum in external trade activities, which will drive Malaysia’s economy into a better position in 2017 compared to last year in particular via private consumption and services sector.

“Thanks to strengthening domestic demand and robust external sector performance, we opine Malaysian economy will be able to expand 5.1 per cent in 2017,” it said.

Distributive trade rose strongly by 11.1 per cent year-on-year in July 2017, fastest growth since March 2014, adding the solid growth was contributed by robust expansion in sales of motor vehicles, wholesale trade and retail trade.

“For instance, sales of motor vehicles soar up by 9.8 per cent year-on-year during the month, fastest expansion in two years.

“As for retail trade, the sub-component of distributive trade registered a new record with growth momentum stood at 14.1 per cent year-on-year.

“We opine the robust expansion was partly due to softening inflation, sanguine business environment and improved labour market,” it said.

MIDF said as exports rose above 30 per cent year-on-year in July, the follow-through effects are among others in a form of manufacturing sales.

Exports of manufactured goods covers about 82.2 per cent of Malaysia’s total exports products.

In July this year, in tandem with exports growth, manufacturing sales soar to its highest at 22.2 per cent year-on-year.

Thus, employment in the sector increased by 2.9 per cent year-on-year, fastest ever recorded while wage growth of manufacturing sector expanded solidly by double digit at 11.3 per cent year-on-year.

“We believe the strong performance in external trade translates into better sales, employment and most importantly improvement in domestic spending.

“Besides, with the slowdown in inflation rate, the economic condition gives extra rooms for domestic consumption to rise steadily in July.

“We expect the upbeat momentum in Malaysia’s domestic spending will continue until the end of this year,” it said.

MIDF said July’s recent figures provide positive cue for continuous decent performance in private consumption and services sector seen in the last two quarters.

“The return of positive growth in motor vehicles sales in July coupled with solid retail trade and wholesale performance were evidences of sustainability in Malaysia’s domestic spending.

“Henceforth, we view the strong momentum in distributive trade will translate into higher growth for private consumption and services sector for the third quarter of 2017,” it said.

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