Regional woes take toll on Singapore’s consumer sector

Unless countries push through with their reforms, there will be no turnaround.

The sector may have done better than FSSTI in 1H14 when the overall market had a recovery, but this eventually did not sustain for FTSE Consumer Services (FSTCS) Index since August 2014 and for FTSE Consumer Goods (FSTCG) Index in the past month.

According to a report by OCBC, both indices have returned to their initial levels seen at the start of the year. OCBC is inclined to attribute the sector’s performance to the subdues macro environment, wherein several elements were at play such as geopolitical tensions, a slowdown in China, lingering concerns of deflation and increasing debt levels especially for the Southeast Asian economies. Thus these drivers could have taken a toll on the consumer sector to a larger extent compared to FSSTI.

However, there is hope in supportive country-specific reforms such as post-election stimulus measures for Indonesia and Thailand as well as accelerated reconstruction spending in Philippines. This is also backed by the rising optimism seen from consumer confidence indices of our selected ASEAN countries. IMF forecasts for these countries’ GDP growth are fairly stable, while Thailand is set to see a jump from 1.0% to 4.6% in 2015. Despite the time lags in implementations, the positive effects on the economies should spell better times ahead for regional consumption growth.

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