SINGAPORE retail sales suffered their biggest drop since 1999 as shoppers cut back on big-ticket items such as cars and furniture amid the city-state's worst ever recession.

The statistics department said on Monday that retail sales fell 11.7 per cent from a year earlier after dropping 7.3 per cent in March and 5.5 per cent in February.

The government also said it slightly revised up its first quarter unemployment rate to 3.3 per cent from 3.2 per cent initially reported in April. The jobless rate was 2.5 per cent in December.

Singapore expects its economy to shrink up to 9 per cent this year, which would be its worst contraction since splitting from Malaysia in 1965. The recession, which began in the second quarter of last year as exports plunged, has started to eat away at jobs and hurt consumer confidence.

The April retail sales numbers are also a bad omen for second quarter gross domestic product growth. Singapore's GDP plunged a seasonally adjusted, annualised 14.6 per cent in the first quarter from the previous quarter, following a 16.4 per cent drop in the fourth quarter.

The unemployment rate will likely rise, further undermining consumer demand, Morgan Stanley said in a report on Monday.

Many of the new jobs recently created by projects in the pharmaceuticals, chemicals, retail and hotel sectors were from investments laid out years ago, and fresh capital outlays are slowing, it said.

'Job losses could soon catch up when the capital expenditure recession invariably intensifies and consumer strength is likely to stay subdued in 2010,' the report said.

Morgan Stanley said it expects Singapore's economy to shrink 10 per cent this year and grow 3 per cent next year.

Sales of motor vehicles fell 28 per cent, furniture and household equipment dropped 11 per cent, and apparel and footwear slid 6.1 per cent, the department said in a statement. Sales fell a seasonally adjusted 3.1 per cent from March. -- AP