KUALA LUMPUR: Malaysia's consumer spending should be robust throughout the year as the economic recovery progresses, according to BMI.
Hence, BMI - a Fitch Solutions company - maintained its cautious yet optimistic outlook for consumer spending in 2024.
The firm believes household spending will increase more significantly compared to 2023, as economic growth continues and consumption patterns return to normal.
"We forecast household spending to grow by 5.0 per cent year-on-year (YoY) over 2024, in real terms, to a value of RM904.6 billion, at 2010 prices.
"Household spending over 2024 will mark the return to pre-Covid levels of growth (household spending grew at a real average rate of 5.2 per cent YoY during the 2015-2019 period)," it added.
For 2025, BMI expects household spending to remain stable, growing by 4.8 per cent YoY.
However, it said spending will be limited by high debt levels and the associated costs of servicing this debt.
"Easing inflation and a tight labour market will support spending, as real wage growth returns to positive territory, supporting purchasing power over the year," it added.
BMI reported a general decline in consumer confidence, indicating a weakening consumer mindset.
Inflationary pressures on commodities like food and fuel are particularly affecting low and mid-income households.
The latest data shows that consumer confidence averaged 87.1 in the first quarter of 2024 (1Q24), down from 89.4 in the fourth quarter of 2023 (4Q23).
"We note that this is still one of the lowest consumer confidence figures in Malaysia since the second quarter (2Q22) when it reached 85.9, with the average consumer confidence in the country between 2005 and 2023 averaging 96.5," it added.
It added that the latest retail sales data had been somewhat more positive.
In May 2024, retail sales grew 8.7 per cent YoY, marking the strongest growth since April 2023.
"The strong growth is due to higher sales in non-specialised stores and other household equipment in specialised stores.
"Nevertheless, while May 2024 figures have proven optimistic, the longevity of this recovery will require further monitoring. We will continue to watch both parameters closely and adjust our forecasts accordingly," it added.