Retail confidence: Waning or winning?

Aspate of business closures across Malaysia struck a chord of worry amongst consumers, as they signalled the loss of confidence in doing business here.

But is that the truth of the situation? Is it really that simple to gauge business confidence in Malaysia?

In spite of the series of retail outlet closures seen in the first half of 2017 (1H17) -- especially those of notable international brands -- analysts saw that business and consumer sentiment improved in the second quarter of 2017 (2Q17).

According to a survey by the Malaysian Institute of Economic Research (MIER), the Business Confidence Index (BCI) gained 1.4 points quarter on quarter (q-o-q) to register 114.1 points while the Consumer Sentiment Index (CSI) picked up 4.1 points q-o-q to reach 80.7 points. However, the latter remained below optimism threshold.

MIER highlighted its Malaysian Economic Outlook for 2Q17 that the 2Q survey result of its BCI revealed that in general businesses are still optimistic about the economy as the index is above the demarcation level of 100-point threshold of optimism.

“The peculiarity of the 2Q17 BCI is that the current and domestic-related indices improved over the previous quarter, however, the expected and export-oriented indices worsened during the same period.

“It shows that businesses are still pessimistic about the nearterm prospect as well as on the export demand, although they are upbeat about the current development particularly on the domestic market.

“Businesses are observed to be very cautious about external development and putting more weight on domestic market,” MIER said in releasing the report.

Meanwhile, the institute noted that from the consumer point of view, the confidence level continues to improve but consumers remained cautious as the 2Q MIER’s CSI increased but remained below the demarcation level of 100 points.

“The survey results revealed that consumers’ current incomes continued to improve and they are more optimistic about their future incomes as well as on the employment outlook.

“However, consumer spending plans take a breather as the confidence remains weak,” the institute said.

MIDF Research noted that the survey results were in line with the current upbeat momentum in Malaysia’s external trade as well as domestic economic activities.

“For instance, Malaysia’s export growth has been surging by double digit for six consecutive months since December 2016,” the research arm said.

On Malaysia’s distributive trade in June, MIDF Research explained in a Monthly Economic Review for August that it expanded by 8.6 per cent year on year (y-o-y), reflecting a solid growth backed by a surge in retail trade that saw y-o-y growth of up to 13.9 per cent.

Due to seasonal demand, retail sales recorded the highest ever growth performance in June 2017. As for wholesale trade, there was 8.4 per cent y-o-y growth, sustaining its form above the eight per cent level from the beginning of the year.

“Overall, this suggests an upward momentum in consumer spending which drive the domestic economy in recent months,” the research arm said.

“In addition, volume index for distributive trade grew by seven per cent y-o-y, while wholesale trade and retail trade recorded growth at 5.7 per cent y-o-y and 12.7 per cent y-o-y respectively during the month.”

Regionally, MIDF Research observed stable trend of domestic consumption in Asean as reflected in the retail sales performance while also noting that China has seen retail sales increased by 11 per cent y-o-y, highest in 18 months.

The peculiarity of the 2Q17 BCI is that the current and domestic-related indices improved over the previous quarter, however, the expected and export-oriented indices worsened during the same period. MIER