Retail sales surged last November for their strongest growth in almost two years, possibly due to the launch of the iPhone X and improved consumer sentiment, say economists.
Total takings grew 5.3 per cent in November compared with the same month a year earlier - its best showing since March 2016, according to the Department of Statistics.
This is a reversal of the 0.2 per cent decline in October - revised down from earlier estimates of a 0.1 per cent dip - and a steeper 0.6 per cent fall in September. It also beat economist forecasts of a modest 1.1 per cent rise, according to a Bloomberg poll. With motor vehicles stripped out, retail sales still grew 4.7 per cent year on year.
Economists say November's data is a sign of a continued pickup in sentiment, thanks to a brightening economy. Maybank Kim Eng economist Chua Hak Bin said: "You haven't seen this type of retail numbers for quite some time. It looks as if growth has broadened and consumers are a lot more upbeat. Generally, the feel-good factor has spread out."
While it seems consumer spending has finally turned the corner, one factor that could influence this recovery is a hike in taxes. The goods and services tax (GST), which has stood at 7 per cent since 2007, is widely seen as the top contender for a rise, with an e-commerce levy another likely candidate. Market watchers expect the issue to be addressed at the upcoming Budget.
Mr Chua said the timing of a GST hike matters. For example, there could be an uptick in retail sales as consumers bring forward their spending ahead of higher taxes.
A possible e-commerce tax could also affect retail sales: "Some of the international e-commerce transactions are not captured (in terms of tax). There could be some shifts as the playing field is levelled as this (e-commerce tax) will take away some advantage that the international online players have."
As of now, retail sales data mostly captures brick-and-mortar spending. Mr Chua believes November's stellar growth was likely driven by smartphone sales, with the launch of the iPhone X. This would explain the sales surge in computer and telecommunications equipment, which was by far the best-performing segment, going up by 16.6 per cent compared with a year ago.
This was followed by supermarket sales at 9.7 per cent and petrol service stations at 9.6 per cent.
On a month-on-month basis, the performance of computers and telecoms equipment was even more stark, jumping 46.5 per cent compared with October. This was followed by motor vehicles at 14.6 per cent. The poorest-performing segment was watches and jewellery with a decline of 3.6 per cent.
Despite the uncertainty over possible tax hikes, economists remain optimistic about the retail sales outlook in 2018. Mr Chua pointed out that even when GST was raised in the past, the booming economy helped offset its dampening effects. "The state of the economy and the job market - those are always the more overwhelming factors."