A Malaysian man is silhouetted as he shops at a wholesale market in Kuala Lumpur, Malaysia on May 19, 2017. (AFP Photo Manan Vatsyayana)
Private consumption and services sector is estimated to grow between 6.3% and 5.3% respectively for 2017 as solid performance of distributive trade in May provides a good hint for better performance in the second quarter, said MIDF Research.
On three months moving average, it said distributive trade has expanded by 9.7% year-on-year for the second quarter, beating the first quarter average of 8.4% year-on-year.
The research firm said continuous solid performance of distributive trade in May signals stronger domestic spending is in play and hence will drive Malaysia’s economy into better position in 2017 compared to last year.
“In line with strengthening domestic sector and robust external sector performance, we opine Malaysian economy will be able to expand 5.1% in 2017,” it said in a note.
It said distributive trade and its component – retail trade expanded by 10.7% year-on-year and 13.1 year-on-year respectively in May 2017, the highest since March 2014.
As for other components of distribute trade, it said wholesale trade and motor vehicles increased by 9% year-on-year and 10.2% year-on-year respectively, the fastest pace so far in 2017.
On monthly seasonally adjusted basis, it said distributive trade and its components grew steadily and none shown contraction.
It said the continuous solid performances of distributive trade indicate that our domestic economic activities remain upbeat indicating improve sign of domestic spending.
MIDF Research said the continuous surge in distributive trade performance was driven by festive season spending.
“Sales promotions and increase in demand led to increase sales of goods and services in particular for the preparation of Ramadhan and Eid. Apart from that, strengthening labour market and stable wage growth continue to support domestic spending,” it said.
“We anticipate the performance of distributive trade as well as domestic spending to remain robust due to the payout of festive bonuses by the federal and state governments for civil servants.
“For example, the federal government allocates RM500 for each of its civil servants while Selangor government paid two months bonuses. Hence in June we anticipate continue robust domestic spending in preparation for Eid and improved purchasing power,” it added.