Consumer spending in Malaysia is expected to stay resilient through the final quarter of 2026, buoyed by government fiscal support, stable inflation rates, and improving household sentiment, according to research from Hong Leong Investment Bank (HLIB). The upcoming Budget 2027, to be announced on October 9, is anticipated to include measures aimed at preserving purchasing power and possibly adjusting the minimum wage, providing additional support to consumers.

HLIB’s analysis noted a disparity between consumer confidence and actual spending in the second quarter of financial year 2026. Although confidence levels dropped to their lowest since late 2022, private consumption grew by 4.8% year-on-year, and retail trade increased by an average of 6.7%. Researchers attributed the gap to a shift in spending patterns, with steady electronic wallet usage observed for groceries and convenience stores, while discretionary spending on food delivery, hotels, and flights declined.

The easing of some earlier cost pressures has helped bolster sentiment. Notably, the fuel quota reduction for subsidised RON95 petrol implemented in April was reversed starting September 1. Inflation rates have remained moderate, with headline inflation measuring 1.8% in July and 1.9% in August, down from a peak of 2% in May. The subsidised petrol price remains at RM1.99 per litre, protecting households from rising energy costs.

Fiscal support continues to be a significant factor underpinning consumption. The government’s 2026 cash assistance programmes, Sumbangan Tunai Rahmah and Sumbangan Asas Rahmah, represent a combined allocation of RM15 billion, providing up to RM4,600 per household. HLIB estimates that some households may receive total support—including cash payments and fuel subsidies—of around RM8,500 annually, equivalent to approximately 23% of the median formal-sector wage reported in March 2026.

In addition to support measures, HLIB anticipates a potential revision to the minimum wage, which currently stands at RM1,700 since February 2025. Expectations point to an increase to between RM1,900 and RM2,000 in 2027. This adjustment could further boost spending power, particularly benefiting value-focused retailers such as 99 Speed Mart Retail Holdings and MR DIY Group.

Tourism is another element expected to contribute to consumer sector growth. While international arrivals were stable at 12.9 million in the first half of the financial year, travel receipts surged by 23.2% to RM62.2 billion. The upcoming Formula 1 event at Sepang from October 2 to 4, coinciding with China’s National Day Golden Week, may provide an additional boost. China remains Malaysia’s fastest-growing tourism market, with arrivals increasing by 25.2% year-on-year to 1.41 million in the first quarter of 2026.

HLIB’s sector coverage saw seven of nine consumer stocks meet or exceed earnings expectations in the recent reporting cycle. They expect weaker performers like MR DIY and Kopi Kenangan to recover in the second half of the year, attributing previous shortfalls primarily to timing issues and one-off costs.

While one analyst highlighted the positive effects of steady domestic spending supported by fiscal measures and tourism activity, a more cautious viewpoint was also presented. Concerns remain about the persistent cost of living pressures and global uncertainties, which continue to weigh on consumer confidence and discretionary spending levels.

Overall, Malaysia’s consumer sector is poised to face a cautiously optimistic outlook, supported by government assistance and improving travel-related demand, though rising input costs and subdued confidence continue to pose challenges.