MIDF Research: Positive outlook for consumer sector

KUALA LUMPUR: THE outlook for Malaysia's consumer sector in 2025 remains highly positive, supported by a range of favourable economic conditions, according to MIDF Research.

The firm is optimistic about the sustainability of domestic consumption spending, underpinned by a stable macroeconomic environment, steady employment levels, and salary increments for civil servants and a gradual recovery in the tourism sector. 

These factors collectively are expected to drive continued growth in retail spending. 

Maintaining a "positive" stance on the sector, the firm said the key driver of growth is the anticipated rise in disposable income, which will fuel increased consumer spending. 

"This rise in disposable income is further supported by targeted government measures, particularly initiatives in the 2025 budget designed to stimulate consumption and uplift households.

"In tandem with this, a stable labour market will ensure continued income growth, fostering sustained domestic consumption," it said in a note.

It noted the introduction of EPF's Akaun Fleksibel (Account 3), which offers unprecedented liquidity, enabling members to withdraw funds at any time for any purpose. 

This policy has already boosted household cash flow, spurring expenditures across both essential and discretionary categories. 

MIDF Research said the sector will also benefit from a surge in tourist arrivals, contributing to heightened demand for both essential and discretionary goods. 

Beyond these demand-side factors, the firm said the strengthening of the ringgit and a favourable decline in raw material costs are set to enhance operating margins for companies throughout the sector.

"This confluence of positive drivers will create a solid growth trajectory for the consumer sector, boosting retail activity and contributing to overall sector performance in 2025," it added.

MIDF Research said relative stability in the ringgit is expected to offer some relief to industries heavily reliant on imports, particularly in the food and beverage (F&B) and poultry sectors, where many essential commodities are priced in US dollars. 

It noted that the local currency is expected to continue its upward trajectory, with economists predicting an average exchange rate of RM4.23 against US$1.

"If this forecast holds true, the strengthening of the ringgit will likely create a more favourable business environment for domestic players, especially those with substantial dependence on imported raw materials. 

"Reduced import costs would contribute to improved profit margins for companies in the F&B and poultry sectors," the firm said.

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