Consumer spending to remain strong despite unexpected OPR hike
KUCHING: Consumer spending in Malaysia is expected to remain strong despite the earlier-than-expected Overnight Policy Rate (OPR) hike recently, analysts say.
“Even though we expect that consumer demand may weaken due to the Bank Negara Malaysia’s (BNM) 25-basis-point hike and the expiry of various government relief measures in mid-2022, the continued recovery in the labour market and Malaysia’s further easing of the Covid-19 restrictions may help to support domestic retailers in the second half of 2022 (2H22),” the research team at Kenanga Investment Bank Bhd (Kenanga Research) opined.
However, it cautioned, the ongoing supply-chain disruptions may continue to exert downward pressure on consumer spending.
“Amid strong domestic economic recovery prospects, private consumption growth is projected to expand by 6.1 per cent in 2022 (2021: 1.9 per cent), bringing the overall GDP to potentially settle around the five to 5.5 per cent range (2021: 3.1 per cent),” the research team added.
Meanwhile, the research team at MIDF Amanah Investment Bank Bhd (MIDF Research believe that domestic economic reopening, improving labour market and stable inflationary pressure are among key factors supporting Malaysia’s consumer spending this year.
“Despite rising food inflation, receding low-base effects of fuel inflation will keep overall inflationary pressure to remain stable,” it added.
It noted that inflationary pressure in Malaysia remains moderate as headline inflation maintained at 2.2 per cent y-o-y (February 2022: 2.2 per cent y-o-y) in March 2022, the main drag was by non-food segment 1.3 per cent y-o-y (13-month low).
“As a net importer of food products, Malaysia experienced the effects of surging global commodity prices via higher food inflation which continued on uptrend as it hit more than four-year high at 4.2 per cent yo-y.
“Hence, we view spike in food inflation would drag consumer spending trend especially on food & beverages.
“In addition, unexpectedly BNM has turned on the OPR normalisation button by raising 25 basis points in May 2022,” it said.
Nevertheless, it pointed out that steady recovery in labour market to continue benefiting consumer demand in the near term as jobless rate stayed at pandemic low of 4.1 per cent in March 2022.