NO MORE SHOPPING BOOM: Reality bites Malaysian shoppers

KUALA LUMPUR - Shoppers in Malaysia are pulling back on conspicuous consumption due to flagging wages and political instability, and shattering the dreams of global brands hoping to tap what was set to be a regional boom, the Financial Times (FT) reported.

Eager to reap the gains of what was to be a post-crisis consumption binge in Asean, these multinationals have arrived or expanded just in time to see consumers suddenly baulk over purchases they previously made on a whim.

Malaysia has recorded declines in both manufacturing and credit card spending, an indicator of domestic consumption, amid spiralling household debt and stagnant wages as well as the uncertainty over the government.

Putrajaya is under pressure over the stalling economy caused by sharp declines in oil price since last year, and the controversy surrounding the heavily-indebted 1 Malaysia Development Bhd (1MDB) that is wholly owned by the Finance Ministry.

The financial woes of 1MDB has also prompted demands for a leadership change in Putrajaya, with calls for Prime Minister Datuk Seri Najib Razak to step down.

Consumer spending in Malaysia has also slowed sharply since March, following the introduction of the Goods and Services Tax (GST) on April 1.

“Corporate executives were rubbing their hands because of spending in Asean... In the long term that may well hold — but this soft patch in household spending is likely to stay for quite a while,” the FT quoted HSBC’s co-head of Asian economic research, Frederic Neumann, as saying in its report.

Malaysia’s doldrums is contributing to the regional gloom, with Indonesia and Thailand — Asean’s largest and second-largest economies — experiencing similar slowdowns.

Indonesia’s economic growth fell to its lowest in five years during the previous quarter, while Thailand’s consumers are increasingly cautious with their spending due to burgeoning household debt.

Like Thailand, Malaysia’s already-high household debt is continuing to grow unabated, with data from the fourth quarter of 2014 showing that household debt-to-gross domestic product (GDP) ratio is 146 per cent, an increase from 139 per cent during the same period in 2007.

Analysts are sanguine about the situation in Indonesia, however, telling the FT that its decline was likely temporary. They were more concerned about Thailand due to the ageing population there and the resultant drop in wage earners.

They did not offer mitigation for Malaysia’s economy.

Still, one regional economist said the situation was unlikely to last.

“This has temporarily pulled the brakes on consumption,” Rahul Bajoria from Barclays told the FT.

“But I think the trend can revive again.” - Malay Mail