KUALA LUMPUR (June 13): Malaysia's retail sales grew far more than expected in the first quarter of 2023 (1Q2023), driven by the Chinese New Year celebration in January as well as the one-month school holiday in February and March.

The retail sector recorded a 13.8% year-on-year (y-o-y) sales growth in 1Q2023, compared with 18.3% y-o-y in 1Q2022.

According to the Malaysia Retail Industry Report for June 2023 compiled by Retail Group Malaysia (RGM), the latest quarterly result was 50% higher than the estimate made by members of the Malaysia Retailers Association (MRA) and the Malaysia Retail Chain Association (MRCA) in March this year of 9.2%.

"The recovery of Malaysia's retail industry has been sustainable since the end of 2021. Shopping traffic had returned in all major shopping malls and commercial centres located across the country. Shoppers had returned to physical stores. Malaysian consumers were buying non-essential goods, as well as dining in good quality cafes and restaurants," RGM said in the report.

However, sales performances of retail sub-sectors during 1Q2023 were mixed.

The department store cum supermarket sub-sector recorded a growth rate of 16.2% during the quarter, down from 18.3% posted in 1Q2022.

After a slowdown in business a year ago, the supermarket and hypermarket sub-sector witnessed its sales return to pre-Covid-19 levels, said RGM. The sub-sector expanded by 7.7% in 1Q2023, compared to a 7.6% contraction in 1Q2022.

The mini-market, convenience store and cooperative sub-sector continued to deliver a promising growth rate at 13.4% in 1Q2023, against a 7.6% growth a year earlier.

The growth rate of the fashion and fashion accessories sub-sector stood at 23.4% in 1Q2023, lower than the 52.1% growth recorded in 1Q2022. Nevertheless, RGM pointed out that this was the highest growth rate achieved among the retail sub-sectors during the latest quarter.

The MRA and MRCA are projecting retail sales growth to slow to 2.6% in 2Q2023, as many retail sub-sectors are expected to undergo a normalisation path after a strong recovery in 2022.

"The third-quarter growth rate is estimated at 2% only due to a high base in the same period a year ago. During 3Q2022, the retail industry's growth rate jumped by 96% y-o-y.

"For the last quarter of 2023, Malaysia's retail industry is hopeful of a 3% growth rate, after a rosy performance a year ago," said RGM.

Meanwhile, RGM revised upwards its Malaysian annual retail industry growth rate for 2023 to 4.8%, from the 4% growth forecast it made in March, due to the better-than-expected retail results in 1Q2023.

"Shopping traffic has returned to pre-Covid-19 levels. Shoppers are visiting physical outlets and dining in their favourite cafes and restaurants. However, Malaysia's retail industry is still facing several major challenges for the second half of this year.

"Although the monthly inflation rate has eased during the last few months, price increments for many basic necessities and consumer goods are still higher than pre-lockdown [levels]," it said.