Singapore's retail sales in March came in weaker than expectations, with ex-auto sales particularly weak at -3.2% y/y, following the Lunar New Year-related bounce in February. Car sales, especially smaller cars, increased sharply in March - up 37.1% m/m sa - encouraged by the fall in COEs (in late February), lower fuel prices and also the concern that interest rates were going up.
Retail sales overall have struggled to grow over the past year, weighed by a fall in tourist arrivals, as well as the property market correction, which has sapped confidence and led to lower sales of furniture and household goods due to lower property transaction volumes. A further compounding factor has been the pickup in market interest rates, with 6m SIBOR remaining relatively elevated at 0.92%. These headwinds are likely to continue to weigh on retail sales in the coming months.
"Despite the headwinds facing domestic consumption in Singapore, a tight labour market is likely to keep core inflationary pressures firm. As such, the MAS is expected to keep policy on hold this year, and only look for further adjustments in policy parameters in the event of significant changes to the growth outlook", notes Barcalys in a report on Friday.
