Singapore's bright private consumption forecast takes hit as inflation picks up

Retail sales are expected to remain weak into 2019.

Residents stepping up purchases amidst larger money to burn can only bode well for Singapore's consumption outlook which is expected to retain its positive momentum well into 2019. 

Real private consumption is expected to increase from 3% in 2018 to 4% in 2019, according to Fitch Solutions, as consumers continue to  benefit from real wage growth brought about by a tight labour market.

However, rising inflation levels poses a risk to Singapore's bright consumption outlook as the prices of goods and services are expected to pick up pace from 0.5% in 2018 to 1.5% in 2019, the research firm said.

Also read: Singapore GDP growth slows to 2.6% in Q3

Fitch Solutions also expects the weak performance of retail sales growth to extend in 2019. Retail sales fell for the second straight month after dropping by 0.4% in August to $3.8b led by a decline in motor vehicle purchases.

“We do not expect retail sales to improve over the rest of 2018 and into 2019 as the Singapore government is likely to raise goods and service tax (GST) from its current 7.0%, as income taxes were already targeted and raised slightly in the last FY2017/18 budget,” added Fitch Solutions.