DESPITE THE LEAD up to the peak year-end shopping period, Singapore’s retail sales’ growth slowed in November 2011. According to the latest figures released by the Statistics Department, the retail sales index rose 6.4% from a year earlier, lower than the 8.4% growth seen in October. Adjusted for seasonal factors, November’s sales were also 0.6% lower than in October, when they had risen a revised 6%.
Telecommunications and computers saw the biggest jump in sales, or 34.5% more than the year before. However, as analysts at Barclays Capital note, the slower performance in November can be attributed to lower sales in cars, clothing and footwear, recreational goods, watches, jewellery and furniture – all of which had increased sharply in October. Vehicle sales have a 25% weighting in the retail sales index, and rose 5.5% in November from the year before.
“We think retail sales are likely to weaken gradually, alongside softer growth conditions,” analysts Leung Wai Ho and Joey Chew write in a Jan 13 note. They add that the lower bid values for vehicle Certificates of Entitlement also indicate softening consumer sentiment. Moreover, “real wages started to slip in Q3 and are likely to remain subdued as growth slows, but inflation remains fairly elevated.” BarCap forecasts CPI inflation of 5.3% in 2011 and 3.3% in 2012.
Analysts are recommending that investors stick to companies who deal with consumer staples such as food, instead of those which could be hit by lower discretionary spending. In a Jan 4 note, DBS Vickers highlighted Fraser and Neave, Breadtalk Group and Conscience Food Holding, which have sustainable earnings growth as well as the ability to control costs.
Leung and Chew add that the retail sales figures are unlikely to have an impact on the second estimate of Q4 GDP growth. On Jan 3, advance estimates from the Ministry of Trade and Industry showed GDP fell an annualised 4.9% in Q42011 from the previous quarter -- indicating a possibility of a technical recession caused by a slump in exports and manufacturing output -- although it grew 3.6% y-o-y.
“A sharp decline in manufacturing activity, largely reflecting a pullback in biomedical output, offset stronger services activity and led to overall contraction in Q4,” the BarCap analysts say. Singapore’s economy is expected to average 4.8% growth in 2011. However, “we think it is possible that the final estimate for Q4 GDP may be revised slightly higher.”
BarCap is forecasting the Singapore economy will grow 3% in 2012; the government is expecting growth of 1–3%. “Our base case remains for the Monetary Authority of Singapore (MAS) to maintain a modest and gradual appreciation stance for the SGD NEER (nominal effective exchange rate) in April, barring severe financial contagion from the European debt crisis or a hard landing in China,” Leung and Chew write.
They also expect inflation to remain. “In our view, the MAS will prefer to remain vigilant against a resurgence in cost pressures -- arising from a tight labour market and imported food and energy prices.”
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