KUALA LUMPUR: Malaysian consumers continue to tighten their belts as reflected by the 0.3% year-on-year growth of retail sales in the fourth quarter of 2016 (4Q16), according to Retail Group Malaysia (RGM).

The quarterly growth of retail sales decelerated for the third quarter after it hit a high of 7.5% in 2Q16, based on data compiled by RGM from members of Malaysia Retailers Association (MRA).

Retailers are pessimistic about the sales performance for 1Q17. “As consumer confidence remains low, they estimate an average growth rate of only 0.9% during 1Q17,” said the report.

“The year-end school holiday and festive celebration did not motivate Malaysian consumers to spend more. The weak economic environment and bleak job prospect discouraged shoppers to buy more than usual.

“4Q16’s growth rate was a let-down taking into consideration the low growth rate of 1.3% during the same period in 2015,” said RGM in its latest quarterly report that was released over the weekend.

For 2016, domestic retail sales expanded by 1.7%, which was not much stronger compared with 1.4% growth in 2015 — the year when goods and services tax was introduced in April that year.

“After almost two years, the retail industry has yet to recover. Economic condition remains tough for retailers,” said RGM.

In view of the lacklustre growth pace in 4Q16, RGM has slashed its forecast annual retail sales growth to 3.9% to RM101.6 billion for 2017 from RM97.8 billion in 2016, compared with its initial forecast of 5%.

RGM pointed out that the latest quarterly result was way below market expectations. “It was 95% below the estimate made by members of MRA in November 2016 [at 5.5%],” RGM wrote in the report.

The weak retail sales are quite a sharp contrast to the growth of private consumption, which had been above 6% for three consecutive quarters since April last year.

Among the sub-sectors, the other specialty stores, which include photo shops, optical shops, children-related stores, second-hand goods stores, toy stores, TV shopping as well as restaurants, were the worst-performing retail category in 4Q16. This sub-sector suffered a contraction of 7.7% — the second consecutive quarter of declining sales. For the whole year, this sub-sector suffered a decline of 2.2% in its business.

In contrast, the fashion & fashion accessories sub-sector was the bright spot among all. The sub-sector continued to fare well in 4Q16.

“It managed to sustain its business with a growth rate of 6.9% compared with the same period a year ago. This retail sub-sector was the best-performing retail sub-sector in 2016 with a growth rate of 5.8%,” said RGM.

Moving forward, for the first-quarter growth rate, RGM predicts a 1.5% improvement in overall retail business.

“The weak ringgit has affected the costs of a large number of retail goods sold locally. Many retailers have begun to raise prices, including prices of food and beverages, household goods as well as other daily necessities.

“Malaysian consumers are expecting to be cautious about their spending on retail goods during the first half of this year. Their cost of living has risen and their purchasing power has reduced during the last one year,” said the quarterly report.