Data Highlights

• Malaysia's Distributive Trade Index (DTI) rose by 5.7% YoY to 156.8 points in May 2024, outperforming the 4.5% YoY gain observed in April 2024. This positive momentum can be attributed to the festive spending associated with Hari Raya and the ongoing resurgence in economic activities, supported by an improved labour market throughout the month. Moreover, on a month-on-month basis, the DTI increased by 1.8%, compared to a 0.7% MoM decline in April 2024. Simultaneously, Malaysia's Distributive Trade Sales saw a commendable 7.1% YoY expansion, reaching RM147.85bn, up from a 6.6% YoY growth in April 2024.

• The upswing in Malaysia's DTI was notably buoyed by gains across all key segments, including Retail Trade, Motor Vehicles, and Wholesale Trade.
   
  • The Volume Index for Wholesale Trade, holding the largest share of the total distributive trade at 44.9%, registered a 3.4% YoY increase to 141.9 points. It marked an improvement from the 2.7% YoY gain recorded in the previous month.
     
  • In addition, Retail Trade witnessed a 6.8% YoY growth, reaching 179.3 points. This gain was also faster than the 3.5% YoY increase observed in April 2024. Most of the subcomponents recorded better growth during the month, led by Retail Sales in Non-specialised Stores (9.0% YoY), followed by Retail Sales of Food, Beverages and Tobacco in Specialised Stores (8.5% YoY) and Retail Sales of Other Goods in Specialised Stores (7.9% YoY).
     
  • Similarly, Motor Vehicles experienced a healthy growth albeit moderated from the previous month. The index reaching 140.1 points, faster from a month and a year ago by 8.5% and 9.6% YoY, respectively.
     
• During the initial five months, the DTI increased by an average of 4.2% YoY. Analysing this trend, the three-month moving average of the index exhibited a 4.6% YoY expansion in May 2024, indicating an uptick from the previous reading of 4.0% YoY. We believe that consumer spending is set to maintain its resilience, driven by several key factors such as the ongoing improvement in the labour market, the stability and consistency of income and the additional disposable income gain from the EPF account 3. We are likely to see the performance of personal spending to be better in 2Q24 as indicated by an encouraging growth in the April-May period with an average of 5.1% YoY vs. 3.7% YoY recorded in 1Q24.

• Additionally, we anticipate the possibility of fuel subsidy rationalisation for RON95, which is likely to occur in the latter part of this year. Consequently, we may witness a rise in prices in related sectors such as food and transportation costs. This would inevitably impact the disposable income of individuals, prompting potential changes in spending patterns, which could in turn hinder GDP performance this year. For now, we expect personal spending in real GDP to expand by 6.0% YoY, an increase from 4.7% YoY in 2023.

Source: TA Research - 12 Jul 2024