Tag: retail

Categories
Economics

[2815] A hint of consumption recovery in the 4Q15 GDP

The 4Q15 GDP figures came out better than my expectation. I had projected about 4.3% YoY but the official figure came slightly higher at 4.5% YoY. However, it is still an overall slowdown as warned earlier.

GDP 2015Q4

But there is a good news here.

The blue line in the chart above representing consumption growth picked up. That is a green shoot, a hint that the economy might be turning around. Consumption weakness has been the number one reason behind the gradual slowdown we are seeing in the economy. This is why the slight uptick is an important point to note.

I do not have much details behind the stronger (but still weak!) consumption growth yet, but on the production side, there is a reason to be optimistic that this is not some no-good dead cat bouncing around. Based on the performance of the retail sector, consumers did buy more stuff:

GDP 2015Q4 production

There is also good news for people working in finance. The fourth quarter was less bad than 3Q15. The only real bad news is for people in mining. I am unsure if the drop it is all about base effect, but the situation in the oil and gas sector is not pretty regardless. I suppose QoQ readings would tell me more but I am in a hurry right now.

GDP 2015Q4 mining production

We are not out of the woods yet. Despite signs of a turnaround, the 4.5% YoY overall growth is still a slowdown. Consumption has to cover a lot of ground before we can claim to be out of the $700 million MYR2.6 billion hole. And I am worried about the employment rate given so many layoffs taking place late last year. The effects of those retrenchments might come too late to be accounted for in the 4Q15 GDP data.

Finally, for the lovers of headline figures, the curse of 1Q15 frontloading will bite back this quarter. Nevertheless, that will only be a mathematical quirk.

Categories
Economics

[1993] Of recession? What recession? It is a shopping spree!

Visiting the shopping malls of Kuala Lumpur can be a confusing experience. It is always full of happy people with friends and lovers. And probably businesspeople with their clients too.

As I patiently await my opportunity to take a break from this crazy country, I find myself with an employment that is physically located close to Midvalley Megamall, one of the largest shopping malls in Malaysia. This means I visit the mall on every working day.

I do not notice any let up on visitors to the malls. Amid talks of pessimism regarding the economy and ugly reports, the shopping does not seem to relent.

Perhaps, Midvalley Megamall is an aberration, filled with those belonging to a certain class that is by and large not affected by the economic pain even as experts are predicting that the economy could suffer as much as 4% contraction for the first quarter of 2009. After all, the main victims of the ongoing economic slowdown are those from the manufacturing sector. Most frequenting the mall do not seem to belong to the manufacturing sector.

But I can never be sure without data. It could be that I am looking for pattern that I want to see, even if it is not there.

The Department of Statistics today confirms that the trend in Midvalley Megamall is neither aberration nor isolated. I am not dreaming. Based on year-on-year comparison, the retail trade sector actually grew by almost 8%, in defiance of other sectors.

RETAIL TRADE

1. Sales Value

The retail trade sub-sector posted an increase of 7.8 per cent from the comparative quarter of the previous year. The main catalyst was the group of non-specialised retail trade in stores (such as department stores and supermarket including hypermarket) which registered a double-digit growth of 44.4 per cent and retail sale of food, beverages and tobacco in specialized stores of 16.2 per cent. On a quarterly basis, this sub-sector contracted 1.3 per cent.

2. Employment and Salaries & Wages

The number of persons engaged rose 8.4 per cent from a year ago followed by a 9.9 per cent expansion in salaries & wages paid out. A marginal increase of 0.7 per cent in the number of persons engaged and a 3.3 per cent in the salaries & wages was recorded quarter-on-quarter. [Distribution Trades First Quarter 2009. Department of Statistics. May 26 2009]

I think the growth is likely caused by MNC hypermarket retailers’ aggressive expansion nationwide. As a person once employed in the supply chain industry, I can say with certainty that that expansion is true. The expansion of TESCO for instance and especially, was amazing. Their latest expansion plan includes a superlarge distribution center in Bukit Beruntung.

Indeed, the retail sector has been the most impressive and resilient sector so far. In the fourth quarter of 2008, it grew by over 15% based on year-on-year comparison.

It is true that based on quarter-on-quarter comparison, there is a decline but I think that is mostly due to seasonal effect.

It might have been likely that if there was no expansion, there might be a contract in the retail sector. Expansion in a way opens new market. This expansion may have overwhelm any reduction of sales faced by pre-existing outlets. In any case, this raises two questions: if the expansion factor is controlled for, would the retail sector suffer a decline in line with other sectors? Given the expansion, how good is the retail sector — which typically a good barometer of the real economy — in being an indicator of the real economy?

Regardless, that however does not explain Midvalley Megamall still. Perhaps, like I have mentioned above, class of profession plays a large factor as far as Midvalley Megamall is concerned, thus helping the sector to continue to grow in spite of the environment.

Categories
Economics

[1912] Of increased sales in retailing in Q4 2008 and cognitive dissonance

One of the few industries that are truly reflective of the real economy is the retail industry. The reason is that retailing is the industry which will enjoy or suffer the initial wave of any change in the health of consumers’ real wealth.

Today, the Department of Statistics finally made public the performance of the retail industry as well as the distributive trade sector in the fourth quarter of 2008. Despite skepticism expressed far and wide earlier, the retail industry registered an impressive 16.5% year-on-year growth.[1] Distributive trade sector grew by over 10.0% in the same period.[2]

This is surprising given that for the same quarter, the GDP as officially reported by the Department barely grew at 0.1%.

Gross Domestic Product /
Gross National Income
2007p
Q3 2008p
Q4 2008p

Gross Domestic Product (GDP):
Current Prices (RM Million)
641,864
198,653
177,342

Gross Domestic Product (GDP):
Constant 2000 Prices (RM Million)
505,353
136,211
131,261

GDP Growth Rate
Constant 2000 Prices (%)
6.3
4.7
0.1

Gross National Income (GNI):
Current Prices (RM Million)
628,106
192,845
n.a

Per Capita GNI:
Current Prices (RM)
23,115
27,674
n.a

Table reproduced from the Department of Statistics.[3]

This may show how GDP growth as traditionally reported in a single figure is too much of an aggregated figure that masks important trends in the economy.

If accounted for inflation however, the growth in the retail industry as well as in the distributive trade sector might not be all too impressive.

What cannot be ignored is the dramatic dropped between the third and the fourth quarter.

Public domain. Department of Statistics

Only one word can describe the quarter-on-quarter comparison: scary. The number for the first quarter of 2009 ought to be scarier. The same trend is observable for the sales of motor vehicles.[4]

Quarter-on-quarter comparison typically is not a good method to compare figures because it ignores seasonal effect. In this particular case however, the drop is far too big. I admit that I am taking an easy way out by refusing to do proper modeling to account for seasonal effect but by eyeballing it, I doubt removing the seasonal effect would successfully fight the endearing gravity.

Yet, it is hard to imagine how those numbers translate into reality in Kuala Lumpur. Marketplaces and shopping malls are still ridiculously filled with eager consumers, as if those numbers were, well, just meaningless numbers. I for instance regularly visit Midvalley Megamall and my experience there offers me nothing but cognitive dissonance.

A friend shared the same feeling with me last week. He asked how has the deteriorating economic environment affected me. Do I know anybody being adversely affected by it? Do I know anybody who lost his or her job?

I have friends in Singapore and New York who are not so lucky. Then again, those places are Singapore and New York, not Kuala Lumpur. Within Malaysia context, I have yet to feel the slightest brunt of the worsening environment and I do not know anybody personally who has lost his or her job. Answering those questions only strengthen my cognitive dissonance.

My personal outlook is outrageous bright compared to bad news which keeps coming everyday. This especially so when the crisis has serendipitously brought me considerable fortune, thanks to the collapse of the Australian dollar. But I am not prepared to test my luck any farther than I have done at the moment.

Mohd Hafiz Noor Shams. Some rights reserved Mohd Hafiz Noor Shams. Some rights reserved Mohd Hafiz Noor Shams. Some rights reserved

[1] — The retail trade sub-sector continued to record a growth of 16.5 per cent to attain RM29.3 billion as compared to RM25.2 billion registered a year ago. The sales value for this sub-sector went down by 6.7 per cent as compared to the previous quarter.

Public domain. Department of Statistics

[Survey of Distributive Trades Fourth Quarter 2008. Department of Statistics Malaysia. March 3 2009]

[2] — The sales value of the Distributive Trades sector in the 4th quarter 2008 posted a growth of RM85.8 billion or 10.3 per cent as compared with a year earlier. Quarter-on-quarter, the sales value of this sector decreased 10.5 per cent as compared to RM95.9 billion in the 3rd quarter 2008.

Public domain. Department of Statistics

[Survey of Distributive Trades Fourth Quarter 2008. Department of Statistics Malaysia. March 3 2009]

[3] — [Gross Domestic Product / Gross National Income. Department of Statistics Malaysia. February 27 2009]

[4] — In this quarter, the sales value in the motor vehicles sub-sector registered a positive growth of 8.2 per cent (RM11.1 billion) as compared to the previous year. Compared to the 3rd quarter 2008, the sales value of this sub-sector registered a decline of 8.0 per cent. [Survey of Distributive Trades Fourth Quarter 2008. Department of Statistics Malaysia. March 3 2009]