KUALA LUMPUR, Nov 10 — Distributive trade performance is anticipated to gradually improve in the fourth quarter of 2020 (Q4 2020) but the recovery is likely to be influenced by rising daily COVID-19 cases in the country which have pushed most states into conditional movement control order (CMCO).
Distributive trade is defined as the totality of all forms of trade activities, from the procurement of goods from the manufacturer to the delivery of these goods to the consumers. It includes wholesale and intermediation trade, retail and trade in motor vehicles and motorcycles trade.
MIDF Amanah Investment Bank Bhd said while it views the current CMCO to be less stringent than the first MCO, it still has the possibility of deteriorating consumer sentiment.
“People will tend to avoid crowded places on the health concern particularly with mounting cases of COVID-19, which are higher than what we have seen in the first wave.
“CMCO has also slowed domestic tourism activities to some extent while international borders remain closed,” the investment bank said in a research note today.
Distributive sales improved expressively in Q3 this year with smaller contraction of -1.9 per cent year-on-year, pointing towards a significant improvement in the economic growth for the quarter as private consumption is the biggest contributor to the Malaysian economy.
MIDF Amanah said COVID-19 had stifled domestic demand as consumers reduced spending and tightened their purse string due to uncertainty over the near future, and this was reflected in double-digit contraction for the gross domestic product of these two segments in Q2 2020.
“While we believe Q2 2020 is the trough particularly because of the MCO in place, consumption will only advance gradually forward backed by low inflationary pressure, overnight policy rate cuts and economic stimulus packages particularly through people-centric measures.
“This is due to the recent resurgence in new clusters of COVID-19 which could limit the people’s outside activities. Spending especially on non-essential items will take longer than expected to fully recover,” it added.
MIDF Amanah said the services sector particularly involving hotels and aviation would continue to be pressured by the internal border closure, and it foresees private consumption and services sector to contract by 3.8 per cent year-on-year and 4.4 per cent year-on-year, respectively, for 2020.