KUALA LUMPUR (Oct 11): Consumer spending over 2024 in Malaysia will remain stable, according to BMI, a Fitch Solutions company.

In a report on Tuesday, the firm said it holds a positive but cautious outlook for consumer spending in Malaysia over 2024, as the economic recovery feeds through to strong real consumer spending growth over the full year.

It said household spending growth will be more positive, relative to 2023, as economic growth persists and consumption levels normalise.

“We forecast household spending to grow 5% year-on-year (y-o-y) over 2024, in real terms, to a value of RM909.5 billion [at 2010 prices].

“Household spending over 2024 will mark the return to pre-Covid levels of growth (household spending grew at a real average rate of 5.2% during the 2015-2019 period).

“Spending will be constrained by an environment of high debt levels, and its servicing costs,” it said.

BMI, however, said easing inflation and a tight labour market will support spending, as real wage growth returns to positive territory, supporting purchasing power over the year.

Meanwhile, BMI said consumer confidence levels had largely been on the decline, reflecting a weakening consumer mindset, as inflationary pressures in certain commodities such as food and fuel continue to weigh on low- and mid-income households.

It said latest data suggested that consumer confidence in the second quarter of 2023 (2Q2023) — the latest available data — averaged at 90.8, a fall from the 99.2 in 1Q2023, and the lowest consumer confidence figure since 2Q2022.

“The latest retail sales data has also been slowing since June 2022, reaching a rate of 5.5% y-o-y in July 2023 (the latest data available).

“This figure, the lowest since December 2021, highlights the continuous downward trend of retail sales.

“The slowdown is likely due to the fading of growth from base effects, and of pent-up demand from the lifting of Covid-related restrictions,” it said.

BMI said the unemployment rate in Malaysia (as a percentage of the labour force) was 3.4% in July 2023 (the latest data available).

It said this figure was at its lowest level since February 2020, "which underpins our positive consumer outlook".

“Our Country Risk team forecasts unemployment to average 3.1% of the labour force over 2024, similar to that of 2023.

“This comes on the back of strong foreign investments, improving tourism sector performance, and increased activity in key sectors of agribusiness, electronics and manufacturing.

“However, should economic conditions worsen in the market, there is a risk of elevated unemployment, which will quickly feed through into a weaker consumer outlook,” it said.