Decline in retail sales tapered in April

Domestic demand has weakened amid the worsened global economy. Private consumption expenditure fell 5.5% year-on-year in the first quarter of 2009, due to higher unemployment and slackened income.  There was also a high base of comparison in the first quarter last year.  Although retail sales volume contracted by 5.5% year-on-year in April, this represented a relative improvement over the 9.2% decline in March.  The rebounds in the local stock and property markets as well as by the relief measures put out by the Government since last year rendered some support to consumer sentiment.

Capital goods intake decreases

Overall investment spending remained in a depressed mode, down 12.6% in the first quarter, with no sustained global economic recovery in sight.  Machinery and equipment investment fell notably, while expenditure on building and construction declined further in the first quarter, particularly so for private sector construction activity.  The efforts to accelerate public sector projects are expected to begin to pay off in the coming quarters. The import of capital goods fell further in value terms, by 7.6% and 8.3% respectively in March and April.

Residential property prices up

The residential property market has turned more active in recent months and prices have firmed up since the beginning of the year.  The number of transactions in May was up 42.3% compared to a year earlier.  Compared with the recent trough in December 2008, apartment prices on average rebounded by 7.3% in April.  However, apartment rentals fell slightly further in April.

Unemployment rate rose further

Note: (*) Figures used are three-month averages

The seasonally adjusted unemployment rate rose to 5.3% in February-April 2009 as the labor market conditions remained slack. However, the pace of increase slowed in recent months. The labor force continued to grow while total employment contracted. The total job loss since the outbreak of the financial tsunami amounted to some 44,000, with trading and logistics registering the largest losses. The underemployment rate edged up further to 2.2%.  The unemployment rate will continue to be under pressure in the short term, as labor demand will remain weak in the recessionary phase.

Underlying inflation pressure recedes

Inflationary pressure eased notably further, mainly due to the recent decreases in food prices and private housing rentals.  On a year-on-year comparison, the headline and underlying inflation rates in April were 0.6% and 1.9% respectively, notably down from the average rates of 1.7% and 3.1% in the first quarter. 

On inflation outlook, as an integral part of cost and price adjustments in economic downturn, price pressures from both the external and domestic fronts are expected to come down further in the months ahead.  In mid-May, headline Composite Consumer Price Index for 2009 is forecast at 1%, and the corresponding underlying inflation rate (netting out the Government’s one-off measures) is forecast at 0.9%.