KUALA LUMPUR: Consumer spending momentum is still intact as retail trade maintained its double-digit pace and rising above 10 per cent for a fourth straight month, key indication of real private consumption.
Maybank Investment Bank (Maybank IB) said the robust growth in June and July 2017 coincided with the seasonal spending during the fasting month of Ramadan and Eid celebration.
“Other indicators also pointed to sustained consumer spending growth momentum in early third quarter 2017 as domestic purchases by local credit cardholders picked up to its fastest pace in 11 months.
“Tourist spending as tracked by domestic purchases by foreign credit cardholders sustained its growth momentum at 24.3 per cent.
“Consumer-related loans applications and approvals in July 2017 also surged by 28.7 per cent year-on-year compared to 2.2 per cent in June 2017 and 30.3 per cent in July last year.
“Distributive trade volume index (DTI) increased by 9.4 per cent in July 2017, driven by retail trade growth and rebound in motor vehicle trade, indicating the momentum in consumer spending growth in the first half of 2017 was sustained in early third quarter 2017,” it said in a note today.
Meanwhile, motor vehicle trade was seen to have rebounded with festive season promotions and purchases saw motor vehicle trade rebounding by 7.0 per cent in July 2017.
“This is consistent with the rebound in other related indicators including total industry volume (TIV) sales, passenger car production and banking system’s loans approved for ‘Purchase Of Transport Vehicles’.
“July 2017’s data on retail and motor vehicle trades also tie in with our view that consumer spending growth will stay firm in third quarter 2017 on the positive effect of the third – and final installment – of this year’s BR1M payments in Aug 2017; the cash and financial aids for FELDA settlers and army veterans; and increased tourist arrivals and spending during Malaysia’s hosting of SEA Games (19-30 Aug 2017) and Para-Asean Games (17-23 Sep 2017).
“However, we also see the effect of measures to boost disposable income under Budget 2017 to dissipate later in the year,” said the research firm.It added that consequently, it forecasts real private consumption growth to “normalized” by moderating to 5.9 per cent in 2018, unless Budget 2018 throws in further “goodies” for consumers.