A weakening in consumer confidence across the Association of Southeast Asian Nations (ASEAN) member states in the coming months is projected. Factors such as tight monetary policy, a decelerating global economy, and declining income growth are expected to impact the six largest ASEAN markets: Indonesia, Malaysia, the Philippines, Singapore, Thailand, and Vietnam, as per S&P Global.

Late 2022 saw a boost in consumer confidence fuelled by economic reopening and a brisk post-pandemic recovery. However, as the recovery's pace slowed and interest rates increased through the second half of 2023, consumer confidence began to dip. This trend was particularly notable in Thailand and Indonesia, where confidence is reverting to trend levels, and in the Philippines, where it has fallen below trend.

Income growth across the region is also on a downward trajectory, with real household incomes adjusting for inflation showing moderation in 2023 despite stable unemployment rates. This slowdown in income growth, compounded by elevated inflation rates, is expected to continue dampening household spending into 2024. The manufacturing sector's underperformance in 2023, attributed to weaker global demand, has further suppressed income growth, notably in Malaysia.

Despite these challenges, S&P Global forecasts an improvement in real household incomes across ASEAN in 2024, driven by lower inflation rates, resilient labor markets, and steady economic growth. Unemployment rates are expected to remain at or below trend levels, which should mitigate significant reductions in retail activity resulting from weakened consumer confidence and spending power.

However, recent months have witnessed a moderation in retail sales volume growth compared to trend rates, with economic activity in the fourth quarter (Q4) indicating a slowdown that is likely to extend into 2024. Although consumer patterns have shifted since the pandemic, possibly affecting the accuracy of retail sales data, this data still provides a valuable insight into the consumption landscape.

Looking ahead, while private consumption was a key growth driver in 2023, external demand is expected to pose less of a drag on growth in 2024, resulting in a more balanced growth outlook across the region.

Country-specific outlooks vary, with Indonesia expecting modest real income growth and potential monetary policy easing later in the year to boost consumer sentiment. Malaysia faces challenges from weak international trade and electronics output, affecting consumer confidence and household incomes. In the Philippines, easing inflation and loosening monetary policy are expected to stabilise consumption. Singapore's consumer outlook hinges on monetary policy and economic growth, with fiscal measures introduced to support consumers. Thailand's consumer spending may benefit from proposed fiscal stimulus, while Vietnam anticipates a broader economic recovery strengthening consumption in 2024.

Fibre2Fashion News Desk (DP)