Retail Sales Growth May Slow Once Impact of CNY Season Starts to Fade

Singapore’s retail sales rebounded by 7.6% yoy in January, from a decline of 5.9% in December, its strongest growth level since February 2018. Excluding sales of motor vehicles, retail sales also registered a positive increase of 5.3% yoy in January from a drop of 2.8% in December, also its highest increase since February 2018. The rebound in retail sales was attributed to higher sales seen across almost all retail industries except for computers and telecom equipment as well as optical goods and books which had contracted by 11.4% yoy and 1.6%, respectively (-18.7% and -3%, respectively in December 2018).

Strong retail sales seen for motor vehicles of 20% yoy during the month, which had almost erased its decline of 20.6% in December, was partly due to the Singapore Motor Show event as well as low base factor. Similarly, sales of wearing apparel and foot wear (10.6%), medical goods and toiletries (9.2%), department stores (8.8%), supermarkets (8.8%) and food and beverages (8%) also posted stronger sales growth led by pre-Chinese New Year demand. However, going forward, we believe the country’s retail sales growth may slow once the impact of the Chinese New Year season starts to fade. Nevertheless, in 2019, we expect private consumption in Singapore to be partly supported by recently announced Budget 2019, with measures introduced such as the GST Voucher of up to S$300 for lower-income Singaporeans as well as the 50% personal income tax rebate (capped at S$200) for the 2019 assesment year.

In 4Q18, Singapore’s unemployment rate rose slightly from 2.1% in 3Q18 to 2.2%. Despite the increase, the annual average unemployment rate for the full year was lower at 2.1%, compared to 2.2% in 2017. Total employment in 4Q18 had increased at a slower rate of 14.7k from 16.7k in 3Q18 supported mainly by higher employment in services (17k) due to the year-end holidays and festive seasons. We believe that the downside risk to Singapore’s labour market will likely arise from the slower expected growth in Singapore. MTI had previously guided that it expects real GDP growth to be within a range of 1.5% to 3.5% in 2019 compared to 3.2% in 2018 due to a weaker external backdrop, where continued trade protectionism (i.e. trade war between US and China) could impact the Singapore economy through the trade channel. According to the Monetary Authority of Singapore's (MAS) quarterly survey of professional forecasters, Singapore’s GDP growth is projected to expand by 2.5% in 2019.

Separately, Philippines export growth in January 2019 contracted for the third consecutive month by 1.7% yoy from 12.3% in December weighed down by the continuing decline of manufactured goods (-2.5% in Jan vs. -13.2% in Dec) which accounted for 82.9% of total exports in January. As a result, the country’s trade deficit remained steady at US$3.8bn in January for the second straight month.

Source: Affin Hwang Research - 15 Mar 2019