KUALA LUMPUR (Sept 9): Malaysia's retail industry recorded a poorer-than-expected growth rate of 2.5% in retail sales during the second quarter of the year, as compared to the same year-ago period, the latest  Malaysia Retail Industry report showed.

This latest quarterly result fell below market expectation, with members of MRA and MRCA having projected an average growth rate of 4.8% for the second quarter.

For the first half of 2026, Malaysia's retail industry grew by 3.1% as compared to the same period in 2025. 

In the second quarter of 2025, the retail industry contracted by 3.0%, as Hari Raya Aidilfitri celebration in 2025 began from March 31 and the pre-festive sales were captured in the first quarter of 2025.

Cash transfers, including Sumbangan Tunai Rahmah (STR) and Sumbangan Asas Rahmah (Sara), supported basic household spending of majority of Malaysians during the second quarter of 2026. In addition, the Budi95 petrol subsidy empowered Malaysians to optimise their monthly expenditures. 

During this period, Malaysians made lesser shopping trips and always compared prices before purchases. 

They bought more retail goods and services from outlets that offered discounts and vouchers. They purchased more generic brands instead of branded goods. 

They shopped online for goods with lower prices. They reduced trips to services such as haircut, nail spa, beauty treatment, car wash, car maintenance, and cut down on trips to movies and theatres. They also travelled locally instead of overseas.

For the third quarter of 2026, majority members of the two retailers' associations are hopeful of better retail prospects. 

They estimate an average growth rate of 4.7% in retail sales for the third quarter. 

Department store cum supermarket operators are predicting their sales to grow marginally at 0.5%. Department store operators are expecting to turn around with a positive growth rate of 3.8%. 

Supermarket and hypermarket operators are expecting their businesses to remain in the negative zone with -11.1%, the least optimistic projection. 

Fashion and fashion accessories retailers remain upbeat, anticipating their businesses to strengthen with a growth rate of 17.0%, the most optimistic projection. 

Pharmacy operators expect to maintain their momentum with 4.1%, while personal care retailers project 3.8%. Furniture and electrical operators foresee moderate expansion at 1.8%, while other specialty stores expect sales to stay flat at 0.4%.

Retail Group Malaysia maintains its annual retail industry projection of 3.8% growth for 2026, taking into consideration the weaker-than-expected result in 2Q2026 and higher expectations for 3Q2026. 

The projection also accounts for the negative impacts on purchasing power due to the Middle East war since February. Government cash transfers of RM15 billion for STR and Sara continue supporting basic household spending for B40 families. 

Bank Negara Malaysia has indicated annual economic growth could be around 5.0%, supported by sustainable domestic demand and strong export growth. 

The Budi95 targeted fuel subsidy has allowed inflation to stay partly under control with RON95 petrol price remaining at RM1.99 per litre. 

Visit Malaysia Year 2026, targeting 47 million foreign tourists and RM329 billion in tourism receipts, is benefitting retail businesses in major cities. 

The Formula 1 Grand Prix at Sepang from Oct 2-4 is expected to boost retail and food and beverage (F&B) sales near airports, the race track, and Kuala Lumpur. For the last quarter, the retail industry is hopeful of 3.9% growth with year-end festivals and school holidays.