KUALA LUMPUR: Malaysia’s retail trade sector to remain positive in 2023 despite the current softer consumer sentiment.
In a note today, MIDF Research said it believes retail trade for essential items with competitive pricing will stay positive ahead.
It said retail trade was solid in March 2023, expanding 17.7 per cent year-on-year to RM58.7 billion, marking the 12th consecutive month of double-digit expansion.
According to the Department of Statistics Malaysia, non-specialised stores as well as specialised stores for food and beverages and tobacco saw a notable double-digit increase during the month.
Similarly, retail trade for March 2023 showed 0.9 per cent growth month-on-month (m-o-m) compared to a contraction of 2.4 per cent m-o-m in the previous month.
Nonetheless, it noted that the Malaysian Institute of Economic Research’s (MIER) Consumer Sentiment Index (CSI) decreased from 105.3 points in the fourth quarter (4Q) 2022 to 99.2 points in 1Q 2023 due to weaker job and income prospects as well as concerns about rising inflation.
“Despite these considerations, consumer spending plans remained unchanged,” it said.
In May 2023, the average prices of crude CPO and wheat continued to decline on a yearly basis by 47.8 per cent and 42.8 per cent respectively.
Conversely, the average price of raw sugar remained on an upward trajectory in May 2023, increasing 27.6 per cent year-on-year, primarily due to the increased demand following the reopening of various countries, as well as lower global production in the near term due to unfavourable weather conditions in major exporting countries.
“We saw the average prices of CPO and wheat have returned to pre-Russia-Ukraine conflict levels (2021), which benefits food producers,” MIDF Research said.
It noted that the normalisation of prices could reduce the cost of raw materials and offset the higher labour and energy costs, hence supporting the margin.
“Although the price of raw sugar remains high, we believe the impact on food producers is manageable given that sugar consumption is relatively low compared to wheat and CPO.
“Also, we reckon that the various price hikes implemented in 2022 are adequate to offset the increase in labour and energy cost and may not be reintroduced in the near term,” it said.
The research house also sees a promising outlook for livestock producers.
It reckons that the main raw materials for livestock feed have returned to 2021 levels due to the expected increase in global production, which is likely to result in lower prices for corn and soybean meal.
This suggests a decrease in the cost of chicken feed ahead.
Additionally, the government subsidies for chicken egg production, which are in place until June 30, along with the lower feed costs, are expected to support profit margins despite the ongoing price ceiling for chicken and eggs. – BERNAMA
