Malaysians spend to save economy

Hazlin Hassan, Straits Times 13 Jan 08;

Aggressive sales, more malls and pay rise for civil servants take the edge off rising prices

KUALA LUMPUR - SINCE last year, civil servant Khairolyn Ismail has not only been eating more frequently at restaurants but also spending more on each visit.

She also uses her car more often, as compared to the past when she was more reliant on public transport. All because she has more money,said the 29-year-old mother of two.

It is consumers like her with higher disposable incomes and a bigger appetite for spending that the government is depending on to bolster the economy.

Experts are optimistic that strong domestic demand will help Malaysia's economy grow steadily amid a slowdown in the United States economy and global uncertainties for the early part of the year, at least.

Retail figures show that inflation and ever-increasing living costs have not stopped Malaysians from hitting the malls.

Experts attribute the spending spree to: a pay rise which saw some one million civil servants get up to a 35 per cent increase last July; the opening of flashy new shopping centres and aggressive year-end sales.

The pay rise played a major factor, Kenanga Investment Bank head of research Yeonzon Yeow told The Sunday Times. The quantum of consumer loans taken out by civil servants has been growing an average 3 per cent a month since last August.

New malls and super sales have also contributed to the buying spree.

Shopper Madam M.C. Loo, 42, stepping out of a warehouse sale by trendy Spanish clothes label Zara, said: 'I usually spend about RM200 (S$88) to RM300 each time at a warehouse sale, which is actually more than I would usually spend in one go.

'But that's how I save money, by buying things cheaply from these sales.'

Such warehouse sales, selling old stocks of clothes, books, make-up and other goods at rock-bottom prices, have become a trend here in recent years. And they are making even careful shoppers like Madam Loo spend more, helping to drive up consumption.

Industry experts say that an estimated RM70 billion was spent on retail last year, with tourists accounting for 20 to 30 per cent. In 2000, the figure was just over half that amount, at RM38 billion.

It is clear that although the year-end rise in consumption is an annual trend, as Malaysians prepare for the festive season, figures for last year were among the highest ever.

Suria KLCC, located at the base of the Petronas Twin Towers, saw a total of 46 million people spending a record RM2 billion shopping, as at end-November last year.

Sales were up by 15 per cent compared to a year ago, its chief executive officer Andrew Brien told the New Straits Times recently.

The daily said that the amount was the highest level of retail sales registered by retailers within the mall.

Malaysian shoppers now are also more prepared to use their credit cards to make payment. Bank Negara figures reveal that local credit card transactions totalled RM4.75 billion last October, up from RM4.4 billion in September.

But some of that increased spending is attributable to price hikes in items such as flour, sugar and milk, said Mr Michael Hawkins, general manager of TNS Worldpanel, a retail consultancy.

His figures show that inflation rose from 1 per cent in March to 3 per cent in December.

Figures from TNS Worldpanel, which monitors the grocery spending habits of 2,500 households in Malaysia, showed that sales in this area had surged 7.4 per cent from November 2006 to the same month last year.

The rapid expansion of hypermarkets gives Malaysians a wide choice even when it comes to shopping for food and home products.

Last year, Tesco added eight new stores to its existing 11, Carrefour two to its previous 10, and Giant five new stores to its 52.

But expect things to slow down a little in the second half of this year, analysts say. There will be inflationary pressures, with a reduction in fuel and gas subsidies, increase in toll prices and possible higher commodity prices leading to higher food prices.

But this would be offset by government spending, said Mr Yeow. The government is expected to award more contracts in the second half of the year under its economic blueprint, the Ninth Malaysia Plan.

Hopefully, this would in turn buoy private consumption, he said.

The government will also hope that civil servants like Ms Khairolyn will continue splurging.