What does Fitch expect from household consumption in Q2 2021?

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Fitch Solutions Projects Significant Contraction in Malaysian Household Consumption for Q2 2021

Fitch Solutions anticipates a substantial decline in Malaysian household consumption for the second quarter of 2021. Their analysis indicates a quarter-on-quarter contraction of 11.5 per cent, a stark contrast to pre-pandemic trends. This projected downturn is attributed to persistent high unemployment and a decelerating local economy, leading consumers to adopt a more cautious spending approach.
Significant Quarter-on-Quarter Decline

The Country Risk and Industry Research arm of Fitch Solutions has projected that private consumption in Malaysia would contract by 11.5 per cent on a quarter-on-quarter basis for Q2 2021. This figure represents a notable shift from historical patterns, underscoring the economic pressures faced by Malaysian households.
Historical Context of Consumption Growth

In the five years preceding the COVID-19 pandemic, the second quarter typically saw an average growth of approximately 2.4 per cent quarter-on-quarter for private consumption. The projected 11.5 per cent contraction for Q2 2021 highlights a significant deviation from this established trend, signalling a challenging economic environment.
Factors Influencing Consumer Caution

High unemployment rates, hovering around 4.8 per cent in June and July 2021, are identified as a primary driver of increased consumer caution. This, coupled with the projection of a stagnant GDP for 2021 following a 5.6 per cent contraction in the previous year, is expected to compel Malaysian households to reduce their spending well into 2022. Even those employed are facing downward pressure on their incomes, with some accepting wages below the RM1,200 minimum wage and fresh graduates entering the workforce with lower compensation packages than before the pandemic.

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What does Fitch expect from household consumption in Q2 2021?

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