● Distributive trade sales YoY growth edged up slightly in February (5.5%; Jan: 5.4%) on a low base a year ago in the motor vehicles segment

- MoM: sharpest drop in one year (-4.9%; Jan: -0.9%).

● Higher growth in motor vehicles outweighed weaker wholesale and retail trade performance

- Motor vehicles: accelerated (3.7%; Jan: 1.0%) on a low base effect. On a MoM basis, it registered the steepest drop in five months (-9.3%; Jan: -0.9%) on delayed launching of new models and adverse impact of COVID-19 on consumer sentiments.

- Wholesale trade: slowed to a three-month low (5.1%; Jan: 5.2%) due to a moderation in sales of food, beverages & tobacco.

- Retail trade: softened to a 53-month low (6.4%; Jan: 6.7%) weighed mainly by weaker growth in sales of cultural & recreation goods, as more households stayed indoors amid the worsening COVID-19 pandemic.

● Retail trade performance tapered across most advanced and developing economies

- US: eased to lowest in three months (4.2%; Jan: 4.5%) mainly on a decline in sales at gasoline stations attributable to a lower oil price.

- SG: deepest slip in one year (-8.6%; Jan: -4.3%) due to a drop in tourist arrivals and lower domestic consumption.

● 2020 distributive trade sales forecast revised sharply lower to -1.5 to -0.5% (2019: 5.9%)

- The prolonged Movement Control Order (MCO) and high uncertainty surrounding the spread of the COVID-19 pandemic would weigh on consumer and business confidence, disrupting business activities and amplifying instability to future income flow, resulting in reduction in discretionary spending.

- As such, private consumption growth is forecasted to sharply soften to 3.9% in 1Q20 (4Q19: 8.1%) and 1.5% in the 2Q20, dragging the GDP growth to 0.8% (4Q19: 3.6%) and likely a contraction in the 2Q20 (-5.7%).

Source: Kenanga Research - 13 Apr 2020