Trade tensions may exacerbate retail sales slump

Retail sales growth slowed sharply in April, to its slowest pace since the SARS outbreak in 2003. While part of the weakness can be explained by a drop in fuel prices, the slowdown was not limited to spending on fuel alone. The contribution to retail sales growth of spending on household appliances, furniture, daily use products and food also fell sharply. This broad-based weakness suggests that households remain cautious about the outlook and comes on the back of surveys showing that consumer confidence deteriorated in Q1. With sentiment likely to sour further as a result of the recent escalation in trade tensions, we expect retail sales growth to remain subdued over the coming months.