Retail sales for April in the US rose slightly to 0.4%, up from 0.1% in March. Although this growth is some cause for encouragement, it was expected to be as high as 0.6% for last month. The fragile picture for the retail sector in the US is having a noticeable impact on many of its key trading partners throughout Asia.
China, South Korea and India are amongst the US’ biggest trade partners. Exporting goods such as electronics and clothing, they all see the country as a major export market. With demand for Asian goods sluggish, there are tentative signs that the picture for retail sales across the region are beginning to slow down.
For April, Chinese retail sales grew by just 0.79%, down from 0.84% in March. In January, sales growth stood at an even more unimpressive amount of just 0.51%, so there has at least been a small upturn. Part of that is down to other factors, most notably industrial production.
Industrial output
Elsewhere in Asia, industrial output figures seem to correlate with the slow rate of retail growth in the US. Japan is a prime example, with output figures for March contracting. In that month, industrial output nationwide shrank by 2.1%, coming soon after a rise in output for February. Concerns over the historically strong Japanese tech sector have been prevalent for a while.
The picture in other major Asian markets for industrial output is mixed. Growth in India is erratic – contraction in output was recorded in five of the last 12 months. In South Korea, figures for March are positive, but contraction occurred in January and February.
Low demand for home-made products, alongside similarly low demand from the US and sluggish industrial output could all hint at a more prolonged economic malaise. When spread betting, the most sensible choice would be to back against share price rises for major Asian retailers.
Malaysian recovery
One possible ray of light for Asian retail is Malaysia. Despite some of its’ neighbours not performing too well, retail sales growth is pretty healthy. The most recent monthly figures saw month-on-month growth of 4.7% for March, jumping from a position of slight contraction for both January and February.
Among the reasons behind the growth include wider economic growth exceeding expectations for the first quarter of 2017 and increased consumer confidence. Interest rates have remained steady, but the bad news coming from across the Pacific Ocean is likely to dent confidence going into the summer months.
The future for retail in Asia is a little uncertain. The contractions and slow growth experienced in Malaysia, China and Japan may return, with one eye focused on how events are unfolding in the US and Europe.
Should all go to plan and retail sales in the US return to more favourable levels, there is a possibility that the feelgood factor will move to Asian markets. More demand from consumers would equate to higher sales to US firms by Asian manufacturers, but it remains to be seen how this scenario would be played out.