PETALING JAYA: Despite the weakening of the ringgit against the US dollar, the impact on consumer spending in Malaysia will likely be marginal.

According to TA Research, consumer spending is expected to be resilient through 2024, underpinned by the improving labour market and manageable inflation.

“We assess that the risk to consumer spending patterns remains minimal, notwithstanding the current depreciation of the ringgit against the greenback,” it said.

It said consumers would likely respond to higher prices of imported goods, as a result of a weaker ringgit, by adjusting their consumption habits such as shifting towards domestically-produced goods and services.

“In the current year, consumer spending is poised to maintain its resilience, buoyed by several key factors,” TA Research said.

It pointed out that the ongoing improvement in the labour market is a pivotal contributor, with the anticipated jobless rate averaging 3.2% in 2024, slightly down from 3.4% in the previous year.

“This positive trend is reinforced by an expected growth in employment, further fortifying the foundation for robust consumer confidence,” it added.

Moreover, the manageable inflationary pressure, as projected by the Finance Ministry at 2.1% to 3.6%, would add another layer of stability to the economic landscape, TA Research said.

“This inflation management ensures that individuals can make informed purchasing decisions without the burden of excessive price hikes,” it said.

Data from the Statistics Department showed that Malaysia’s distributive trade index (DTI) in January 2024 increased 3.5% year-on-year (y-o-y) as compared to a growth of 3.4% y-o-y in the preceding month.

The positive momentum came amid ongoing resurgence in economic activities, bolstered by an improved labour market and manageable inflationary pressures throughout the month, TA Research noted.

The upswing in Malaysia’s DTI was driven by gains across all key segments including retail trade (1.4% y-o-y), motor vehicles (12.1% y-o-y) and wholesale trade (4% y-o-y).

Meanwhile, Kenanga Research projected the overall sales growth to accelerate in 2024, driven by strong domestic demand amid a stable and lower unemployment rate.

In a report yesterday, the brokerage said it maintained its forecast of an 8% increase in DTI in 2024, up from 7.7% in 2023.

“This positive outlook is reinforced by the continued increase in tourist arrivals and spending. However, the risks to our forecast include the impact of subsidy rationalisation, which could potentially dampen consumer spending and subsequently affect sales growth,” it said.

Against this backdrop, the research house maintained its 2024 gross domestic product growth forecast at 4.5% to 5%, as compared to 3.7% in 2023, reflecting its expectation of a rebound in the manufacturing sector.

“This optimism is particularly rooted in the export-oriented segment, buoyed by the technology upswing and China’s gradual economic recovery, both pivotal to our overall growth outlook,” it said.

Separately, Maybank Investment BankResearch said it expects firmer economic growth in January 2024, based on the performance of the DTI, industrial production index and crude palm oil.

“Together with other indicators like the rise in manufacturing Purchasing Managers’ Index and January 2024’s export rebound after 10 straight months of decline, amid the global tech cycle recovery, these green shoots of economic growth pick up are supportive of our 2024 economic growth forecast of 4.4%.”