April retail sales of Singapore came in slightly weaker than expectations, with ex-autos sales remaining in negative territory on a y/y basis - albeit easing to -0.7% from -3.2% in March. Car sales remained strong, up 56.4% y/y, encouraged by continued subdued COE prices, lower fuel prices and also the concern that interest rates were going up, notes Barclays.
A recovery in tourism provided some support to ex-autos retail sales, with arrivals up 7.4% m/m sa in April, and ex-autos sales up 0.8%. However, the overall trend in both tourist arrivals and retail sales remains weak. On the domestic front, the property market correction has led to lower sales of furniture and household goods due to lower property transaction volumes. Further compounding factors have been competition from online retailers, which has led to local store closures, and the pickup in market interest rates, with 6m SIBOR remaining relatively elevated at 0.89%.
Retail sales are likely to show some recovery in the coming months, as many shoppers likely deferred purchases ahead of the Great Singapore Sale (which runs from end-May to July). Meanwhile, despite the headwinds facing domestic consumption in Singapore, a tight labour market is likely to keep core inflationary pressures firm. 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, says Barclays.
