Published November 15, 2008

[B][SIZE="5"]A nation of window shoppers?[/SIZE][/B]

[B]Retail sales weakness was already evident well before economic sentiment tumbled recently[/B]


SINGAPOREANS to help spend the economy out of recession? Going by retail sales numbers, one had better count on government pump-priming rather than consumer spending - the apparent September retail uptick notwithstanding.

Yes, at a glance, the latest headline retail sales figures do surprise - a 7.2 per cent rise from September a year ago in value terms (8.4 per cent when motor vehicles, the big-ticket category, are excluded). Even in volume terms, the 2.8 per cent increase (4.3 per cent excluding vehicles) also exceeded expectations - which of course were pretty low in the circumstances and following August's flat numbers.

But look a bit beyond these figures and it's apparent that retail sales weakness - evident even well before economic sentiment tumbled in recent months - is quite intact, if not at risk of worsening in the months ahead (which happen to be periods of festive spending sprees).

To begin with, for all the terrible weekend throngs in Orchard Road, consumer spending in Singapore is, even in the best of times, no 'engine' of the economy. Not anything, anyway, on the US scale, where consumer demand is - or has been - a driving force of make-or-break proportions. In the past four still-booming years between 2004 and 2007, private consumption expenditure in Singapore grew just over 4 per cent a year on average - and contributed barely one percentage point to gross domestic product (GDP) growth each year.

If you zoom in on retail sales figures (which tend to be skewed by vehicle sales), the picture may be a bit more indicative, especially over the past 12 months or so. Previously, two sets of data - retail sales volume and value (which captures price effects) - have been more or less in sync. The gap has opened up over the past year, with the value series recording sales growth and the volume numbers showing - over the three quarters to Q2 2008 - decreases.

The trend is similar for the Q3 months of July, August and September - in value terms, one might properly describe retail sales as 'robust', until you see the volume numbers. (Or the seasonally adjusted, month-on-month data.)

It's apparent enough - the nominal value figures reflect the high inflation, higher prices, over the past 12 months or so. The volume data gives a more 'true' picture of actual sales trend and consumer demand. Inflation may have come off a bit of late, but the latest September retail figures certainly still show the price drags.

So, if retail sales have been lacklustre even during the good times, well before all the gloom and doom rolled in, can we expect rip-roaring sales any time soon, as all still-employed Singaporeans do their bit to help shore up the economy?

Chances are, when people worry about losing their jobs or brace for pay cuts, they may not be so persuaded by the paradox of thrift - even the usually civic-minded.

Orchard Road will probably still be as packed as ever, but will people actually dig into their wallets and pockets? Expect more traffic snarls elsewhere perhaps, as more road works and construction get under way.