By A. Stephanie
The widely reported pre-goods and services tax (GST) spending rush did not extend to “big-ticket” items, research house Maybank KimEng said in a report today.
Narrow money supply and credit card transactions surged in February and March, it said, with expenditure concentrated on department and general stores, electronics and telecommunications, and jewelry, watches and cameras.
Consumers also spent on furniture and furnishings as well as apparel.Though passenger cars did not contribute much to the pre-GST spending rush, Malaysians did spend on the automotive sector, for car maintenance services and purchases of parts and accessories.
Maybank KimEng noted, “Passenger car sales grew 2.7% year on year in February. Though it rebounded from -0.7% in January, sales for the first two months this year were were weaker, up 1.1.% year on year compared to 5.5% year on year in 4Q14.
“At the same time, passenger car loans rose 2.7% year on year (January: 2.3%), maintaining the sub-3% year on year growth since last September. The uncertainties – even confusion – on the GST impact on car prices didn’t help and served to encourage a ‘wait-and-see’ attitude,” it remarked.
Residential property loan growth in February was relatively unchanged at 13% year on year compared with 12.9% year on year in January, the research house noted.
In addition, the volume of property transactions in 1Q15 declined 4.6% to 88,600 from 92,900 in 1Q 2014 and 6.2% from 94,500 the previous quarter. Property transactions totalled RM38.5 billion last quarter, down from RM40 billion in the 1Q14 and RM38.6 billion in 4Q14.
The Maybank economists said, “These data suggests no rush to purchase homes despite the developers indicating that house prices will go up by 3%-4% post-GST to factor in the rise in cost due to the imposition of GST inputs like building materials and related services.
“Moreover, the property market is facing slowing price increase, higher real property gains tax (RPGT), and tighter credit standards on household loans,” they noted.
Thus, its economists have maintained its gross domestic product (GDP) and inflation rate forecasts at 4.5% and 3%-4% respectively: “The pre-GST spending rush implies 1Q15 real GDP growth north of 5% year on year, but we expect consumer spending and GDP growth to moderate in the subsequent quarters.
“GST is a broad-based tax in that we estimate 72% of items in the consumer price index (CPI) basket of goods and services are taxed, accounting for 82% of CPI weights.
“Based on other countries’ experiences, GST caused higher inflation rate and the impact can last 10 to 12 months,” Maybank KimEng said, having surveyed 14 other countries which have implemented GST.
On monthly basis, the inflationary impact of GST typically lasted 10 to 12 months, as per the research house’s observations on Canada, Australia, New Zealand and Singapore, largely reflecting the base effect.
However, it noted that there were countries that showed shorter impact of GST on monthly inflation rate, such as Indonesia’s six-month period. There were also cases where monthly inflation rate maintained its post-GST inertia for longer, such as in Japan and Philippines.
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