• Retail sales fell sharply in December (-19.2% YoY; Nov: -16.3%), a seven-month low
  • A broad-based slowdown led by apparel (-59.7%; Nov: -56.6%), followed by other goods (-55.0%; Nov: -51.3%) and cultural & recreation (-40.0%; Nov: -40.3%) as well as due to a high base effect a year ago.
  • MoM: rebounded sharply (4.8%; Nov: -1.2%) attributable to a MoM growth rebound in household appliances (7.0%; Nov: - 3.8%) and stationery & communication (3.3%; Nov: -6.2%).
     
• Growth contraction is expected to ease in January
  • Real Sales Index (RSI) is expected to fall by 14.2% YoY in January, due to a broad-based slowdown across all commodity groups and a base effect. Similarly, growth is likely to fall on MoM (-1.8%; Dec: 4.8%) in line with the weak consumer confidence index which dropped to a two-month low (84.9; Dec: 96.5).
     
• Further improvement expected on YoY sales growth for the next three to six months
  • 3-month Sales Expectation Index (SEI): to expand sharply by 15.9% in March (expected Feb: 8.9%).
  • 6-month SEI: steep expansion expected in June (18.0%; expected May: 5.7%).
     
• Inflationary pressure is expected to remain weak for the next three months
  • 3-month Price Expectations Index (PEI): to fall sharply in March (-6.5% YoY; expected Feb: -2.7%).
  • 6-month PEI: marginal growth contraction expected in June (-0.7% YoY; expected May: -9.1%).
     
• Domestic COVID-19 situation to weigh on growth recovery
  • The retail sales are expected to remain under pressure in the near term given the continued increase of COVID-19 cases, forcing the government to extend the public activity restrictions until 22 February.

Source: Kenanga Research - 10 Feb 2021