Challenging Q1 for consumers?

KUALA LUMPUR: Consumers are likely to be pressured by the adoption of new policies and a weakening ringgit, which may hamper their spending this year, says Kenanga Research.

The research house said the usual festive sales — for Chinese New Year and Hari Raya Aidilfitri celebrations — could help spur demand for discretionary items, which would benefit food and beverage players and retailers.

However, the absence of sporting events this year could translate to less impulse-driven consumption, said Kenanga Research, which has kept its “neutral” call on the consumer sector.

While retailers with high import content may see a dampening impact from sales taxes, lower foreign exchange exposure compared to 2018 and a gradual sales price re-structuring exercise could potentially offset the higher tax component in their respective pricing models, it said.

It expects weaker performance by most retailers in the first quarter due to the higher base in the previous quarter attributed to the usual year-end promotion and Christmas festive season.

“We expect strong growth to come in the second quarter with Hari Raya sales, supported by gradual improvement in consumer sentiment as we move away from last year’s historic event and further powered by gradual sales price re-structuring exercise to mitigate the new sales and service tax impact.”

Kenanga Research said government measures to lessen the financial burden of the B40 group were expected to support consumer spending on basic necessity items.