Business | Economy
India emerges strongest in Asia
China, Singapore and Hong Kong are expected to remain confident for the rest of the year.
- Reuters
- Published: 00:00 August 5, 2006
Singapore: A snapshot of consumer spending and sentiment shows that Asians fall into two camps one suffering the impact of high interest rates and oil prices and another bolstered by rising incomes and robust jobs markets.
South Korea, Thailand and Malaysia are in the first category, with signs consumption growth is slowing, reinforcing a view that interest rates have peaked or are close to doing so. In contrast, consumers in China, India, Singapore and Hong Kong are expected to remain confident for the rest of 2006.
"It is a pretty mixed picture and the strongest in the region are India and China in terms of the consumer spending outlook, followed by Singapore where we look for a second-half pick-up in retail sales," said Sailesh Jha, senior regional economist at Credit Suisse. "Countries where we expect weakness are Thailand and Korea followed by Malaysia."
Indonesia is somewhere in between. Consumer spending has been weak but should pick up as expected falls in interest rates fuel an acceleration in economic growth.
Underlining a rising trend, auto sales boosted Singapore's retail sales in May by 13.1 per cent from a year earlier.
China's retail sales in June were up 13.9 per cent from a year earlier, softening from May's annual pace of 14.2 per cent but maintaining a double-digit growth rate. There is little official data in India on consumer spending, but factory output, which is largely geared to the domestic market, has been on a rising trend since 2003.
In India's latest industrial output data for May, consumer durables production surged more than 18 per cent from a year earlier.
"Income growth in India is the strongest in the region," said Jha. "China also has strong income growth and employment. Put that together with a central bank that has been fairly measured in raising interest rates and the engine for consumer spending is fairly strong for the next six-nine months."
Hong Kong retail sales in June rose 5.2 per cent from a year earlier, cooling from 5.3 per cent in May and softening from stronger growth rates seen earlier in the year.
The picture is different elsewhere. A sentiment index in South Korea this week showed consumers were at their gloomiest in 18 months, adding pressure on the central bank to avoid a rate rise next week.
A monthly report from the finance ministry showed sales at major department stores fell in July 0.1 per cent from a year earlier the first drop in a year and a half.
In Thailand, a survey last month showed consumer confidence fell in June to its weakest in more than four years in the face of the country's political crisis.
"Sentiment in Thailand is weak because of domestic politics and in Korea, it reflects high oil prices," said ABN AMRO economist Irene Cheung.
In Malaysia, consumer spending for rest of 2006 was seen slowing as higher borrowing costs and fuel costs bite.
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