Fast food outlets break overall trend to record increase in receipts in April, reports Team IFM
Singapore, June 16: April has turned out to be a damp squib for local retailers, with crashing auto sales pulling down the sector compared to the previous month as well as the year-ago period, confirming the central bank’s forecast that the second half of 2014 would be marked by inflationary trends.
According to data released by the Singapore Department of Statistics on Friday, retail sales in the city-state plummeted 9 percent this April compared to that of April 2013, while sliding 0.7 percent over the previous month.
The department attributed a large part of the decline to depressed conditions in the auto sector, which witnessed sales nosediving 36.1 percent in April from the year before. Annualised retail sales would have dipped only 1.3 percent if motor vehicles were excluded, the data showed.
“Compared to April 2013, retailers of motor vehicles recorded a sales decrease of 36.1 percent in April 2014,” the department said in a statement. “This was partly due to higher sales in April 2013 when there was a temporary lifting of loan restrictions on the purchase of the pre-existing stock of used cars.”
Data released late last month show the impact that the auto sector had on Singapore’s latest all-item price Consumer Price Index or the headline inflation rate, which spiralled 2.5 percent in April compared to the year-ago period. The rate was 1.2 percent in March.
The reading, which Reuters said was in line with the 2.6 percent median forecast by an analysts’ poll it had conducted, reflected the rise in automobile prices following a low base last year, thanks to the restrictions imposed on new car loans by the government in March 2013.
“Domestic business cost pressures are expected to persist and firms are likely to pass on accumulated costs, leading to broad-based price increases across the economy,” the Monetary Authority of Singapore, the city-state’s central bank, said in its latest half-yearly macroeconomic review.
Interestingly, going by a separate report last month from Singapore’s Economic Development Board, inflationary trends don’t seem to have had any dampening effect on local manufacturers, who believe the next six months will usher in a period of good fortune for them thanks to an ongoing “economic recovery” in the US and Europe.
So much so, data culled by the Economic Board showed layoffs shrinking, reflecting the enhanced business confidence stemming from hopes of new orders.
“Business sentiments in the manufacturing sector is expected to be positive in the next six months ending September 2014, on the back of improved economic conditions in the US and Europe,” the Board said.
RETAIL DOWN
In contrast, according to the Department of Statistics, retail sales decreased 0.7 percent after seasonal adjustments in April over the previous month. Excluding motor vehicles, retail sales declined 1.5 percent.
The situation was grimmer compared to April 2013, with year-on-year sales decreasing 9 percent in the month under review. Excluding motor vehicles, retail sales fell only 1.3 percent.
Food and beverage services fared no better, which after seasonally adjustments decreased 0.7 percent compared to March. Compared to April 2013, sales in the food and beverage services sector actually went up 1.8 percent in April 2014.
After seasonally adjustment, one of the sectors that best reflect consumer spending – restaurants, other eating places such as cafes and canteens and food caterers – recorded decreases of between 0.3 percent and 1.3 percent in receipts in April compared to the previous month.
On the other hand, fast food outlets recorded an increase of 2.1 percent in receipts.
Compared to April 2013, turnover at other eating places as well as fast food outlets and food caterers rose between 1.6 percent and 3.9 percent this April. However, turnover of restaurants decreased 0.8 percent during this period.
After seasonally adjustments, sector-wise month-on-month sales of watches and jewellery, recreational goods, apparel and footwear, department stores and medical goods and toiletries decreased between 1.5 percent and 10.9 percent in April.
Similarly, petrol service stations, provisions and sundry shops and supermarkets registered declines of between 0.4 percent and 0.8 percent in sales as well.
On the other hand, retailers of telecommunications apparatus and computers as well as optical goods recorded higher sales of 2.1 percent to 5.7 percent.
AUTO SPANNER
The major spoilsport for retailers, it seems, has been the rate of inflation; spiralling automobile prices as well as transportation costs have led to the rate of inflation to double in April over the month before, pinching consumer spending.
However, a joint statement by the central bank and the Ministry of Trade and Industry last month stressed that “for the whole year, car prices are likely to add negligibly to inflation”.
The joint statement also referred to last year’s low base of price, caused by the restrictions that led to a dip in Certificate of Entitlement (COE) premiums. The COE grants the holder to own and use a vehicle for 10 years; when demand is high, the cost of a COE or premiums can exceed even the value of the vehicle.
“This increase had been anticipated in the February and March inflation reports and largely reflected a rise in car prices due to the low base a year ago,” the MTI-MAS statement said. “All other major categories, except accommodation, also experienced slightly stronger price increases during the month.”
The official statement said the “CPI-All Items inflation is projected to come in at 1.5-2.5 percent in 2014”.
However, ANZ economist Daniel Wilson was sceptical of this figure. “For the full year, we expect headline inflation to come in at 2.7 percent, which is above the official forecast of 1.5 to 2.5 percent, with some downside pressure from accommodation costs,” Wilson told Singapore’s Today newspaper.
The joint statement said private road transport cost climbed by 7 percent in April, “reversing four consecutive months of decline”.
This reflected the rise in COE premiums which was exacerbated by the low base in April 2013, it said, adding that petrol pump prices also edged up at a faster pace compared to the previous month.
“Inflation of private road transport costs, which is about 11.6 per cent of the CPI basket, will likely stay above 5 per cent in the coming months at least through the third quarter,” Wilson said.