1Malaysia Mega Sale: A Stunted Consumer Growth This Year

1Malaysia Mega Sale Carnival

With the 2014 1Malaysia Mega Sale Carnival just around the corner, will the shopping malls be filled to the brim with shoppers out hunting for a good deal or will Malaysians refrain from binge shopping in view of heightening costs of living?

This year has left millions of middle-class Malaysians grappling with the fast rising cost of living that forces them to take tough measures to cope. With the biggest increase in state controlled electricity and petrol costs since 2008, it is expected that domestic spending growth will be negatively affected and the country will likely have to shift its reliance towards exports this year.

Shopping is becoming more of a luxury

While consumer confidence in Indonesia (124 points) and the Philippines (116 points) continue to rise in the first quarter of 2014, Malaysia saw the largest decline in the index from 98 points to 92 points (2 points below the global average of 94 points), according to Nielsen Global Survey on Consumer Confidence and Spending Intentions 2014.

“The continuing decline in consumer sentiment in the country compares unfavorably [sic] with the resilience seen in some of the neighboring [sic] countries” says Luca Griseri, head of Nielsen’s Financial Services in Singapore and Malaysia.

“For example, it is interesting that the well-known political challenges have had hardly any effect on Thai consumers, who remain generally optimistic about their financial situation. Malaysia which has recorded quarter-on-quarter declines for the past year is primarily driven by rising fuel and grocery prices due to the reduction in government subsidies in these areas.”

To cope with the rising cost of living, most Malaysians are seen tightening their belts by spending less and saving more, in contrast to their behaviours last year.

According to the same survey by Nielsen, more than three in five consumers choose to save their spare cash (64%). They have also chosen to cut back on expenses for home improvements (14%) and basic out of home entertainment (16%) as means to manage household expenses.

Consumer growth compared to last year

Due to the financial uncertainties this year, Malaysians are expected to adopt a more careful spending pattern. Despite the Chinese New Year celebrations, the Malaysian Retail Industry Report reported only 4.8% hike in the first quarter of the year, followed by 5% in the second quarter.

In the third quarter, retail will be expected to pick up again at 6.3%, due to the Hari Raya celebrations. However, by comparison, retail growth is still generally slower than last year, where the first quarter alone saw a 7.5% growth.

“The Hari Raya celebration, which comes early this year (in July), will contribute to 6.3% growth in retail sales during the third quarter.

“The entire 2014 was expected to see overall growth of 6%,” said Tan Hai Hsin, managing director of Retail Group Malaysia.

What’s stopping shoppers?

A nation that loves to shop, but isn’t – the question is, why? With the Mega Sale, and shopping malls coming up in every neighbourhood, which factors are stopping Malaysians from spending their money like how they used to?

It’s no doubt that 2014 has so far delivered financial blow after financial blow to the consumers in the country, with more to be expected next year.

According to Kenanga Research in a report released in April 2014, most consumers are concerned about the higher cost of living, increased subsidy rationalisation and the anticipation of the Goods and Services Tax (GST) being implemented.

These factors when combined, are without a doubt major contributors to the even more cautious spending habits of consumers.

According to Richard Chan, the former president of Malaysian Association for Shopping and Highrise Complex Management in an interview with The Star, the consumer sentiment was cautious due to uncertainty created by the impending GST, which takes effect on April 1 next year.

However, we may just see a sudden rise in consumer spending as we close onto the GST and as people get more certain about how the new tax system will indeed affect them. “In some countries, just before they implemented their own GST, people were buying things like crazy. We expect that to happen here. For now, many are waiting to see if prices will drop,” Chan added.

Who suffers the most?

According to the latest Malaysian Employers Federation (MEF) survey, executives are projected to get a 5.63% average increase in salaries, down from 6.31% in 2013, and non-executives will also see lower increases at 5.65% down from 6.7% last year.

With the pay raise rates dropping amidst higher living costs from further subsidy reductions and rising inflation, it is definitely a cause of concern for most Malaysians. This especially impacts the middle-income group who make up about 27.8% of the households in Malaysia as of 2012 data from the Department of Statistics.

Those in the middle-income group, who make as little as RM3,000 a month don’t benefit as much as other segments from government handouts (BR1M) or income tax cuts, said Wan Saiful Wan Jan, chief executive officer at the Institute for Democracy and Economic Affairs in a Bloomberg report. But at the same time, are impacted most significantly by the subsidy reductions and impending GST.

Will the government’s plan to undo years of subsidies in the country in the name of raising the nation’s fiscal deficit, be worth the effort? Just like it takes years to rake up the deficit, it will also take years to achieve equilibrium again. In the government’s efforts to reduce the fiscal deficit perhaps these measures are too severe and too sudden as they’re rapidly deteriorating the quality of life of over a quarter of our nation’s citizens. On the other hand, perhaps now is the best time as the economy is also seeing strong growth (Bank Negara forecasts a 4.5%-5.5% growth this year up from 4.7% in 2013) instead of implementing austerity measures when things go downhill.


Need some help to cope? Here are five ways you can combat the rising cost of living.

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