Strong US retail sales in April should cheer Asia's export-dependent economies but a more broad-based recovery in the world's biggest economy is needed to sustain the region's rebound, analysts said yesterday.
The US Commerce Department said retail sales shot up 1.2 percent in April from the previous month, the largest increase since last October and well above market expectations. It means that American consumers bought more products such as healthcare items, clothing and accessories as well as electronics and appliances -- many of them made in Asia.
"The numbers are encouraging for Asian markets because they indicate that the US consumers are still alive and kicking," said Eddie Lee, a regional economist with DBS Vickers Securities.
But retail sales alone were inadequate because they remained threatened by rising unemployment. US firms remain hounded by falling profits, forcing them to hold back on investments, economists said.
Lee said that until US businesses start investing again, "the onus of sustaining this recovery rests on the American consumers."
Nizam Idris, a regional economist with research house IDEAglobal, said US orders, which remain weak, have greater impact on Asia than retail sales.
"You need more than just stronger retail sales ... but this is encouraging because this might lead to stronger orders going forward in May," he said.
The impact of April's stronger retail sales data should be reflected in a more robust Asian exports by July, Nizam said.
"If we see stronger US orders in May as a result of the stronger retail sales in April, this should be translated to stronger exports for Asia sometime in July," he said.
* The US Commerce Department said retail sales shot up 1.2 percent in April from the previous month.
* US consumers are buying more products such as high-tech electronics and appliances, many of which are made in Asia.
* Still, rising unemployment is a worry. So, too, is a lack of profits at US firms, which is inhibiting capital spending.
He noted that the rally in Asian stock markets after the rise on Wall Street was limited and reflected the fact that US retail sales had only an indirect impact on Asian exports in the future.
"We are actually worried that without a rise in corporate profitablity, it will be unlikely that there will be capital spending, which might eventualy lead to weaker consumption," Nizam said.
He expressed hope that US consumers would continue to drive the recovery until the companies start an investment-led rebound which could take place in the September quarter.
Song Seng Wun, an Asia economist with G.K. Goh Research, said Asian manufacturers are still receiving orders from US companies on a spot basis, indicating that demand was still fragile.
"The key really is when manufacturers start to receive the orders for the [Christmas holidays]. This will start to be reflected in the third quarter and onwards," Song said. "We need a much broader-based recovery, that is, more spending on durable goods and a demand for all product groups rather than just DVD players and game machines," he added.
Lee said that while the retail sales numbers are not enough to lift Asia, they are "encouraging and this makes it a little harder for the bears to take over."
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