Singapore October retail sales down 2.8%

Yet, excluding car sales, growth came in at 5.3%, suggesting that people are not just window shopping.

October retail sales fell by 2.8% y-o-y in nominal terms, a weakening from the 0.3% y-o-y rise in September. This was below consensus of -1% y-o-y and our assumption of zero growth. Sales also fell in real terms -5.3% (vs. -0.4% in September), according to an HSBC report.

However, sales picked up in sequential terms, rising by 0.9% (vs. -2.6% in September) and 0.3% (vs. -2.4% in September) in nominal and real terms, respectively.

Excluding car sales, nominal retail sales grew at a slightly faster pace of 5.3% y-o-y (vs. 5.2% in September), below consensus of 6.4% y-o-y and our forecast of 6.2% y-o-y. However, sales growth (ex cars) slowed to 3.7% (vs. 5.1% in September) in real terms. On a sequential basis, retail sales (ex cars) declined slightly by 0.1% m-o-m (vs. 0.4% in September) in nominal terms, but fell 1.9% m-o-m (vs. 0.5% in September) in real terms.

By non-car components, most categories experienced faster annual growth in October. For example, nominal department store sales grew by 7.6% y-o-y (vs. 4.3% in September) and supermarket sales were up 3.2% y-o-y (vs. -0.2% in September), and wearing apparel & footwear as well as watches & jewelry were also handed over the counters at a faster pace than in September. However, nominal sales of telecommunications apparatus & computers fell 2.4% (vs. 17.9% in September) after strong growth rates in previous months, which alone contributed about -0.7ppt to the annual growth rate and -0.6ppt to the sequential growth rate relative to September's readings.

While the numbers came in below expectations, they show that retail sales, abstracting from the policy-driven car sales, are still quite robust. Moreover, sales held up in October even after the sales of (new-product) launch-driven telecommunication & computer sales took a breather after the spending spree during the July-September period.

The robust underlying sales are primarily the result of the favorable labor market conditions, with employment growth strong and wages rising. Moreover, a continued influx of tourists also supports retail sales as they flock to the famous Orchard Road or many of the other great shopping places in town.

So, with growth remaining strong and inflation trending up, the MAS is expected to maintain its tightening bias for a while. Even as the economy settles at a more sustainable rate of growth in the coming quarters, capacity utilization is already high and this implies more demand-led inflation pressures going ahead.

Despite undershooting expectations, this was a quite healthy reading, attributable to the favorable labor market conditions and Singapore's growing role as a tourist destination. This also means that the MAS will maintain its tightening bias for a while.