Monday 05 Jun 2023
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This article first appeared in The Edge Malaysia Weekly on December 5, 2022 - December 11, 2022

There appears to be a disconnect between actual consumer sentiment and behaviour. For all the complaining that consumers continue to do about rising prices and costs, and the pain that high inflation has inflicted on their budgets, you would expect retail sales to be fairly pedestrian.

But the latest retail sales figures show that even when consumers say they are worried about inflation, they continue to spend. Malaysia’s retail sales for the third quarter of 2022 (3Q2022) logged an impressive 96% year-on-year jump, exceeding market expectations of 50% to 61.7% growth.

For perspective, the strong performance was mainly lifted by the low base effect a year ago, as the majority of retailers were forced to shut down during the first half of 3Q2021. According to Retail Group Malaysia, the enhanced movement control order was enforced in a large part of Selangor and selected locations in Kuala Lumpur — the country’s largest retail market — from July 3 to 16 last year.

Then there was the post-pandemic revenge spending, which saw consumers eager to go out and spend after being cooped up in their homes for two years.

Never mind that the inflation rate for 3Q2022 stood at 4.5%, and that prices of basic necessities have been rising since the beginning of this year.

In fact, the good news for retailers is that Malaysian consumers are likely to continue spending more money in 4Q2022, as they are projecting an average growth rate of 13.9%.

Retail Group Malaysia, which compiles statistics on the sector, has also revised upward its growth estimate for 4Q2022 from 1% (estimated in September) to 6%, after taking into consideration the better-than-expected growth in 3QFY2022.

So, when consumers complain about the rising cost of living, revenge spending may still get the tills ringing — at least for a while.

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