KUALA LUMPUR (March 20): Malaysia’s retail sales will accelerate in the first quarter of the year following a weaker-than-expected showing in the final three months of 2024, an industry research firm said on Thursday.

Retail sales grew 3.5% in October-December 2024 compared to the same period in 2023, Retail Group Malaysia (RGM) said in its latest industry report. That was weaker than the 4.4% growth projected earlier and the 3.8% year-on-year gain in July-September 2024, partly due to rising cost of living and shortened school holidays.

Nevertheless, retailers surveyed are hopeful for a boost from Chinese New Year celebrations and school holidays, the RGM said. Department store cum supermarket operators as well as the fashion sub-sectors, in particular, are targeting a strong recovery in the first quarter, the consulting firm said.

Unemployment rates have been steady in the final months of 2024 at 3.2%, near the 3% level economists consider to be full employment. Inflation, meanwhile, averaged a manageable 1.8% during the quarter.

Consumers, however, are bracing for rising cost of living, amid policy measures, including subsidy rationalisation for widely used RON95 petrol by the middle of 2025 and an increase in electricity tariffs.

“While 85% of Malaysian households will continue to enjoy government subsidy on electricity usage, businesses will incur higher operation costs due to this increment,” RGM warned. “Retail businesses are likely to pass this cost to end-consumers.”

For the entire 2025, RGM is raising its forecast for retail sales growth to 4.3% from 4.0% previously projected in November 2024. In 2024, retail sales rose 3.8%.

Food-and-beverage operators in Malaysia will struggle with increases in operations costs as well as weak ringgit that raises prices of raw materials and ingredients, RGM flagged.

Further, ongoing boycotts of several international franchises due to the Middle East war will likely continue in the immediate term, which may lead to more temporary and permanent closures of outlets across the country, the firm added.