The latest economic statistics say this about you and your spending: you're paying more but buying less. And if you're like most Singaporeans, you're spending more on things that make you feel good about yourself, and less on things you really need.

Now, I'm not a fan of using economic statistics as investment guides but I have to say this morning's mundane-sounding release of Monthly Retail Sales and Catering Trade Indices for Dec 2007 was full of juicy news. This pulse-check of local consumer sentiment showed two things: first, just how much prices have risen (surprise, surprise), and second just how much this has impacted on spending and therefore potentially on the sales and profits of local companies. It's also exposed what Singaporeans will continue to buy, no matter what.

Here is the evidence:

Total retail sales and catering: up 2.5%, but if prices had remained steady they would have fallen 2.6%.

Provision & sundry shops: up 5.3%, but on a same-price basis down 1.4%

Food & beverages: flat, but down 5.3% if prices had remained steady

Petrol stations: up 33.9%, but only up 1.3% if prices were steady. The oil price obviously played a big factor here

Watches & Jewellery: up 6.4% but down 3.8% if prices were steady. The rising price of gold and strengthening Singapore Dollar may have played a role

In short, inflation is crimping demand (=we're paying more but buying less as a result), and that's not good for local companies selling in the local market. In addition, these stores may well be absorbing some price increases from their suppliers. That's not good for profit margins.

If there's one silver lining it's that excluding car sales, total expenditure was up 3.9% if prices had remained steady. It seems Singaporeans are buying fewer cars (probably a good thing), but more clothes, shoes, phones, computers and fast food.

Hmm… now what does that say about the priorities of our society?!


Mark Laudi, who's watching the budget being released at time of writing, with a keen eye on how inflation will be mitigated through non-inflationary actions.

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Labels: inflation, Monthly Retail Sales and Catering Trade Indices, Singapore Economy