MBSB sees retail sales moderating in 2026

KUALA LUMPUR (June 15): MBSB anticipates retail sales to moderate to 5.5% in 2026 from 6.1% a year ago, as a healthy labour market and positive income growth, including salary adjustments for the public sector, are expected to establish steady support for consumption activity.

Malaysia's distributive trade surged by 15.3% in April 2026 (March: +9.8%), mainly driven by double-digit growth in wholesale trade (+24.1%; March: +15.7%), while motor vehicles spiked to +15.5% (March: -3.1%).

In contrast, retail trade remained robust despite moderating to 6.3%, reflecting a slower rise in consumption with fading effects from the festive season, added with rising inflationary pressure hitting consumer sentiment.

"Apart from increased tourist arrivals and spending, key liquidity injection, specifically the Phase 2 Sumbangan Tunai Rahmah payment, provided a significant tailwind to household spending during this period," the research firm said in a note on Monday.

Distributive trade volume also grew stronger by 6.3%, supported by stronger volume growth for motor vehicles and wholesale trade.

However, a slowdown was seen in retail trade, which eased to 3.8%.

"The growing gap between wholesale trade value and volume signals that recent growth is also primarily price driven, reflecting the broader pass-through of rising global commodity prices and elevated producer inputs into domestic supply chains," it said.

Over the longer term, domestic demand should remain resilient as a buffer against inflationary risks from Middle Eastern geopolitical tensions and potential downside risks to the external trade outlook, said MBSB.

However, it warned that the consumption outlook remains subject to a more challenging inflationary environment, as refinements to targeted petrol subsidies will likely make consumers more cautious in their spending plans.

Meanwhile, Malaysia's tourist arrivals eased to 2.1 million in March, bringing 1Q2026's total to 6.5 million, representing a modest 2.5% year-on-year growth.

While direct exposure to the Middle East was negligible at 0.4% in 2025, geopolitical spillovers threaten the broader long-haul segment, which accounts for 8% of total arrivals.

On balance, while Visit Malaysia Year 2026 will still support the services and retail sectors, the total uplift is expected to fall short of initial projections.

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