Inflation concerns not stopping consumer spending growth

A report from MIDF says there are positive signs for the growth of consumer spending in Malaysia though inflationary concerns are not going away.

“Continued expansion in the consumer spending reflected the effects of a pick-up in economic activities, steady recovery in the labour market and stable inflationary pressure,” it says.

Analysts say inflationary pressure will stay stable despite volatile food prices.

“Headline inflation moderated to 4-month low at +2.3%yoy in Jan-22, following deceleration in non-food inflation to 10-month low at +1.7%yoy in Jan-22.

“On a flip side, food inflation spiked to 4-year high at +3.6%yoy. The slowdown in non-food inflation mainly due to receding low-base effects of fuel inflation,” it says.

“If the government maintain the capped fuel prices, we should expect continuous moderation of the energy inflation for this year.”

inflation concerns

On a flip side, skyrocketing commodity prices following the Ukraine-Russia conflict would give direct and indirect impacts on global food inflation as well as Malaysia’s food prices amid heavy dependency on imported food products.

“However, we believe the tapering fuel inflation will outweight the rise of food inflation, thus overall inflationary pressure to stay within +2~3% in 2022.”

Distributive trade sales growth 2022 debut at 8-month high in Malaysia, increasing by +7.7%yoy in Jan-22, the biggest gain since Jun-21.

Sales of motor vehicles and retail trade surged to an 8-month high at +19.4%yoy and +7.3%yoy respectively while wholesale sales improved by +5.7%yoy.

“We maintain our retail trade forecast at +5.5% in 2022. Domestic economy reopening and progressive improvements in macroeconomic data are staging for a strong consumer spending in 1QCY22 as well as for 2022.

“We forecast private consumption to expand by +6% for 2022. With international borders to reopen in Apr-22, we opine services sector among others to benefit and expand by +7.1% for 2022,” MIDF says.