● November retail sales fell sharply to its lowest since June (-16.3% YoY; Oct: -14.9%)

− Attributable to a broad-based slowdown led by apparel (-56.6%; Oct: -58.1%), followed by other goods (-51.3%; Oct: -53.5%) and cultural & recreation (-40.3%; Oct: -40.6%).

− MoM: growth contraction eased (-1.2%; Oct: -5.3%) due to smaller decline in stationery & communication (-6.2%; Oct: - 11.8%) and food, drinks and tobacco (-0.5%; Oct: -5.3%).

● Deeper contraction in December expected

− Real Sales Index (RSI) is expected to fall by 20.7% YoY in December, lowest since November 2008 due to a broad-based slowdown across all commodity groups and a base effect. Conversely, growth is expected to rebound on MoM (2.9%; Nov: - 1.2%). This is also in line with the improving consumer confidence index which reached a nine-month high (96.5; Nov: 92.0).

● YoY sales growth are expected to improve for the next three to six months

− 3-month Sales Expectation Index (SEI): to rebound sharply by 8.9% in February (expected Jan: -2.7%).

− 6-month SEI: to expand in May (5.7%; expected Apr: 4.0%).

● Inflationary pressure is expected to remain weak for the next three to six months

− 3-month Price Expectations Index (PEI): to fall at a slower rate in February (-2.7% YoY; expected Jan: -6.3%).

− 6-month PEI: deeper contraction expected in May (-9.1% YoY; expected Apr: -5.7%).

● Surging COVID-19 infections to weigh on growth recovery, but would be supported by vaccine rollout

− The surging COVID-19 cases are expected to continuously weigh on the tourism sector in the near term amid lower purchasing power and continued cross border restriction following the global announcement of new COVID-19 strain. Nonetheless, growth would be supported by the efficacy of vaccine rollout.

Source: Kenanga Research - 13 Jan 2021