Car sales in Singapore on a downhill

Sales of motor vehicles continue to tumble as the industry posted a 17.4% y-o-y decline in September due to the short supply of certificates of entitlement.

This, however, is an improvement from the 25.8% y-o-y drop in August.

In a statement, HSBC said the overall growth in retail sales for September was dragged down by the volatility of car sales. The retail sector just posted a meager 0.3% y-o-y growth at current prices (vs. -1.1% y-o-y in August). The number is below consensus of1.5% y-o-y but is in line with the bank’s forecast of 0.1% y-o-y.

“September retail sales grew by just 0.3% y-o-y in nominal terms, not impressive but better than the drop of 1.1% y-o-y in August. The total index is, as always, heavily influenced by the vagaries of motor vehicles sales, jumping around dependingon the government's decisions regarding auctions of certificates of entitlement.

Stripping out car sales, growth came in at a healthy 5.3% (vs. a revised 6.4% in August) and picked up on a sequential basis supported by healthy labor market conditions and the influx of tourists,” the bank said.

On a sequential basis, total retail sales declined by 2.4% m-o-m (vs. an increase of 2.3% m-o-m in August), but it accelerated to 0.7% m-o-m excluding cars (vs. 0.1% m-o-m in August).

In volume terms, retail sales fell by 0.3% y-o-y (vs. -2.3% y-o-y in August), but grew at a solid 5.2% y-o-y (vs. 5.8% y-o-y in August) when you exclude cars. On a sequential basis, retail volumes declined by 2.2% m-o-m (vs. an increase of 2.0% m-o-m in August), but grew at a faster pace of 0.8% m-o-m without cars (vs. 0.4% m-o-m in August).

HSBC said that despite the low figures, Singapore economy remains strong. “With annual GDP growth remaining in double-digits in Q3, the economy is not exactly running out of steam despite the sequential drop in growth in Q3. And even as the economy settles at a more "normal" rate of growth in the coming quarters, capacity utilization is already high.”

The sequential uptick in retail sales excluding cars a clear sign that consumers arenot just window shopping, HSBC said. With the inflation also trending up, “the MAS is, therefore, expected to maintain the tightening bias, even as the growth momentum is naturally slowing following the rapid post-crisis rebound,” the bank said.