KUALA LUMPUR: The 6.7 per cent growth in distributive trade seen in July 2024 bodes well for services activities in early third quarter of 2024 and supports CIMB Securities' 5.5 per cent growth forecast for the services sector this year.
Roughly half of Malaysia's gross domestic product (GDP) comes from the services sector.
Malaysia's distributive trade grew 6.7 per cent year-on-year (YoY) in July driven by higher wholesale and motor vehicles, mitigating the slowdown in retail sales.
The growth was driven by the wholesale and motor vehicles which rose 5.5 per cent and 12.2 per cent respectively.
In volume terms, distributive trade grew 5.5 per cent YoY, similarly led by motor vehicles which rose 10.8 per cent and an expansion of 5.2 per cent in wholesale, but dragged by retail which grew 4.6 per cent.
"July's distributive trade volume growth of 5.5 per cent YoY represented an acceleration fromQ2 2024's expansion of 4.9 per cent, which bodes well for services activities in early Q3 2024.
"The improving tourist arrivals and receipts along with buoyant motor vehicle sales will likely provide the support for the overall services sector in the second half of 2024 (2H24), underpinning our 2024 services sector estimate of 5.5 per cent," it said in a note.
It said retail sales growth moderated in July, but still showed some resilience, likely bolstered by continued account 3 withdrawals from the Employees Provident Fund.
However, it said there were some indications of downtrading, particularly in food and beverage as consumers adjusted to the rising cost of living.
The firm maintained its GDP forecast for this year of 5.2 per cent, reflecting its continued expectation of a recovery in external demand driven by the global tech upcycle, along with the positive effects of strong domestic spending.
This is underpinned by robust investments and resilient consumer spending in 2H24.