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RETAIL sales fell unexpectedly in February - the first time in seven months - as inflation hit 26-year highs and worries swirled about the health of the world economy.
Shops, supermarkets and other retailers saw revenues dip 1.3 per cent from a year earlier, as car sales declined 10.6 per cent and food and beverage sales dived 21.8 per cent.
The overall contraction by the sector would have been bigger if not for much higher prices this year. In constant prices terms, sales fell 5.7 per cent.
'This is the worst reading since the 5 per cent fall in March 2007, if one were to ignore the 2 per cent contraction in July that was due to the hike in the goods and services tax,' said HSBC economist Prakriti Sofat.
Yesterday's figures, published by the Department of Statistics, clocked in far weaker than anticipated. A Bloomberg News poll of 11 economists found a median estimate for a 4.2 per cent increase.
Analysts said rising living costs and uncertainty about the economy would weigh on the minds of Singapore consumers this year.
Citigroup economist Kit Wei Zheng said: 'We might be seeing early signs that consumers are starting to tighten their belts a little bit.
'With higher inflation weighing on consumers and as wage growth moderates with slower economic growth, retail sales could come off.'
Many, however, remain largely optimistic about the domestic retail scene, saying the poor February showing could be a statistical blip.
Conditions for domestic demand remain positive, helped in no small part by the Government, which is giving cash from last year's surplus to the whole population and issuing food vouchers to the poor, they said.
'Low interest rates and a healthy jobs market should keep spending firm,' said HSBC's Ms Sofat.
She added that February's decline was due largely to a high base set the previous year, and predicted that March sales would bounce back with a 15 per cent surge.
Also, if compared with January, February sales improved 8.8 per cent after adjusting for seasonal effects. This was the strongest performance in four years, she said.
CIMB-GK economist Song Seng Wun said much of the poor performance came on the back of weaker car sales. Excluding those, retail sales would have risen 2.9 per cent.
Car sales have been hurt since October by rising certificate of entitlement prices, caused by an expected cut in quotas from next month and surging pump prices.
Mr Song added that monthly figures might be skewed by the different timing of the Chinese New Year break.
Taking an average of January and February, and excluding car sales, the retail sector grew 10 per cent this year, beating last year's 6.7 per cent, he said.
Goldman Sachs economist Mark Tan said: 'For now, we expect the retail sales trend to be robust going forward, underpinned by the buoyant labour market.
'The fiscal measures aimed at alleviating the impact of rising prices will also provide a boost for retail sales and support the domestic demand growth momentum.'
bryanlee@sph.com.sg
TO SPEND...
'For now, we expect the retail sales trend to be robust going forward, underpinned by the buoyant labour market.'
GOLDMAN SACHS ECONOMIST MARK TAN, who expects retail sales to pick up
...OR NOT TO SPEND
'We might be seeing early signs that consumers are starting to tighten their belts a little bit.'
CITIGROUP ECONOMIST KIT WEI ZHENG, who expects consumers to tighten their belts
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