Robust Domestic Spending Continues Despite Inflation Risk Concerns

As of Jul-22, domestic destinations continued to dominate at 66.6% (2021: 81.5%) while international at 34.0% (2021: 18.4%) whereby 13.0% were non-Asean and 21.0% Asean.

Robust Domestic Spending Continues Despite Inflation Risk Concerns
Photo by Dave Yap / Unsplash

Retail spending remained on upward trajectory. Malaysia’s distributive trade sales growth continued on double-digit expansion rate for 4-consecutive months, +41.0%yoy in Jul-22. By component, retail spending expanded strongly by +37.5%yoy, wholesale trade up by +20.6%yoy and motor vehicles sales by +613.8%yoy.

The high growth rates were widely expected due to low-base effects as Malaysia faced another tight nationwide lockdown in Jul-21.

International passenger movements continued on increasing trend. Sequential month growth rate of international passenger traffic remained on double digit rate since Mar-22. Pre-pandemic, 50.7% of Malaysia’s airports passenger traffic contributed by international travel, 25.0% by Asean and 25.7% by non-Asean destination.

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As of Jul-22, domestic destinations continued to dominate at 66.6% (2021: 81.5%) while international at 34.0% (2021: 18.4%) whereby 13.0% were non-Asean and 21.0% Asean.

We forecast retail trade growth at 17.6% for 2022. Malaysia’s consumer spending is expanding strongly as reflected in retail trade sales growth of +21.6%yoy in 7MCY22.

Looking at the macro outlook and improving fundamentals, we project retail trade growth to +17.6% for this year. We believe the pent-up demand will continue until end of this year underpin by improving labour market, stable inflationary pressure and domestic economy reopening.