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Members of Malaysia Retailers Association (MRA) were interviewed on their retail sales performances for the rest of Year 2011 and their forecasts on 2012.
2011 RETAIL PERFORMANCE
For the fourth quarter of 2011, Malaysia retail industry recorded a surprisingly high growth rate of 11.5% in sales, as compared to the same period in 2010 (Table 1).
This latest quarterly result was more than 100% higher than the estimate by Retail Group Malaysia (at 5.0%) in December last year. It is also higher than the estimate made by members of Malaysia Retailers Association (at 10.0%).
The school holiday, year-end sales and Christmas contributed to the very encouraging performance during this latest quarter.
For the whole of 2011, Malaysia retail industry registered a growth rate of 8.1%.
For the last quarter of 2011, retailers still needed to absorb the rising cost of goods and to offer very attractive bargains to attract shoppers to buy. Many retailers suffered from poor growth in their business profit margins.
COMPARISON OF RETAIL SALES WITH OTHER ECONOMIC INDICATORS
For the last quarter of 2011, Malaysia national economy recorded a relatively weaker growth of 5.2% (Table 2, at constant prices), as compared to 11.5% for retail sales (at current prices). The poor external economic environment continued to have negative impact on Malaysia economy. This had affected the growths in the manufacturing and services sectors.
Inflation rate slowed down to 3.2% during the fourth quarter of 2011. The main contributors to the higher cost of living were from food and non-alcoholic beverages sector (5.3%) as well as transport sector (3.2%).
Private consumption maintained its growth at 7.1% during the fourth quarter of 2011 supported by stable employment market and higher income growth.
The Consumer Sentiment Index (by MIER) dropped to 106.3 point during the fourth quarter of 2011. This is the lowest point recorded for the whole of last year. Malaysian consumers were concerned on their take-home pay, future job prospect and rising cost of living.
Unemployment rate maintained at 3.1% during the last 3 months of this year.
RETAIL SUB-SECTORS’ SALES COMPARISON
Members of MRA from most retail sub-sectors recorded strong growths in their retail businesses during the fourth quarter of 2011 (Table 3).
Department Store cum Supermarket sub-sector registered a sustainable growth rate of 10.1% during the last quarter of 2011, as compared to the same period a year ago. This is the only retail sub-sector that enjoyed consistent quarterly growth rates for last year.
The Department Store sub-sector managed to turnaround after a slower growth at 2.2% in the third quarter of last year. This sub-sector recorded the positive growth of 9.0% for the last quarter of 2011.
Fashion and Fashion Accessories sub-sector managed to expand at an even faster pace as compared to the previous quarter. For the fourth quarter of 2011, this retail sub-sector grew at 16.8% as compared to the same period a year ago. This is the highest growth recorded among the retail sub-sectors.
The Other Specialty Stores sub-sector (including retailers selling photographic equipment with photo processing services, optical products, sportswear and sporting equipment, fitness equipment, golf equipment, second-hand goods, souvenirs as well as products that cater to tourists) managed to expand by 9.6% during the last 3-month period of 2011.
NEXT 3 MONTHS’ FORECAST
Members of Malaysia Retailers Association remain optimistic of their businesses for the first quarter of this year. They expect their sales to rise by 12.1% (Table 4).
However, Retail Group Malaysia is expecting a lower growth of less than 10.0% during the first 3 months of this year. The slower economic activities during the last quarter of 2011 will led to slower retail spending in the beginning of 2012. The drop in consumer confidence level at the end of last year will also led to poorer spending on comparison goods.
The department store cum supermarket operators are expecting their businesses to remain sustainable this year. For the first quarter of 2012, they estimate their businesses to grow by 10.2%.
After a strong performance in the end of last year, Department store operators expect their business to slow down during the first 3 months of this year with a growth of only 2.2%. Once again, this is the lowest estimate given among all the retail sub- sectors.
Similar to Department Store sub-sector, retailers in the fashion and fashion accessories sector are expecting the growth of their businesses to moderate at 8.2% during the first quarter of this year.
On the other hand, retailers in Other Specialty Stores sub-sector (including retailers selling photographic equipment with photo processing services, optical products, sportswear and sporting equipment, fitness equipment, golf equipment, second-hand goods, souvenirs as well as products that cater to tourists) are expecting their businesses to grow at a faster pace of 19.4% during the first quarter of this year. Once again, this is the highest growth estimate among the retail sub-sectors.
EXPECTATION FOR 2012
The still unresolved debt crisis in Europe, the depressed US economy and the slowdown in China export market are affecting the Malaysian economy in 2012.
This uncertain external environment will indirectly lead to Malaysian consumers to be cautious in their spending because they are worrying on their future job prospects. They will wait for sales before they buy. They will look out for value-for- money promotions.
Credit card spending by the 3.3 million principal credit cardholders will be reduced this year due to new guidelines to control the credit limit and number of card issuers allowed for each card holder. Banks have also raised interest rates on outstanding credit card balances.
Since January this year, banks have tightened their lending to end consumers. New loan approval is based on nett income rather than gross income of applicants. This has affected the sale of high-value consumer goods including car, electrical and electronics and furniture.
Costs of retail goods will continue to rise this year at moderate level. This is due to rising raw material costs and increasing transportation costs. This will continue to affect the purchasing power of Malaysian consumers.
Cost of running labour-intensive retail businesses has gone up due to higher employer’s EPF contribution (1% increment for monthly salary of not more than RM 5,000.00). Minimum wage requirement that is likely to be implemented this year will push operation costs higher. Higher cost of businesses will lead to higher prices on retail goods and services.
Nevertheless, the 1.2 million government servants have higher salaries this year. RM 100 and RM 200 book vouchers given to school students by the government will boost sales in bookstores nationwide for the first quarter of this year. The government has also released a one-off RM 500 aid under the Bantuan Rakyat 1Malaysia (BR1M) to close to 4 million households with income less than RM 3,000 per month for the last few months. All these will increase retail spending from the masses during the first half of this year.
Bank Negara of Malaysia (Central Bank of Malaysia) estimates its national economy to grow by 5.0% this year.
Retail Group Malaysia maintains its earlier estimated growth of 6.0% for the Malaysian retail industry in 2012.