MasterIndex™ of Retail Forecasts Robust Retail Sales Growth across Asia/Pacific

Retail sales growth across Asia/Pacific in the second half of the year is expected to continue the strong performance displayed within the first six months year, according to the latest MasterIndex™ of Retail forecast released by MasterCard International.

Year-on-year retail sales volumes are anticipated to grow for all 12 Asia/Pacific markets covered under the forecast for the second half of 2004. Prospects for Singapore are the brightest with a forecasted year-on-year growth of 19.0% for the second half of the year. Double digit growth is also expected from China (12.0%) and Taiwan (10.5%), followed closely by Thailand (9.8%), Hong Kong (9.5%) and Malaysia (8.5%).

Conducted twice a year in June and December, the MasterIndex of Retail was launched in June 2003 by MasterCard as part of its knowledge leadership in Asia/Pacific. It is among MasterCard’s MasterIndex suite of research initiatives, providing six-month forecasts of retail sales growth in 12 markets: Australia, China, Hong Kong, Indonesia, Japan, Korea, Malaysia, New Zealand, Philippines, Singapore, Taiwan and Thailand.

Highlights of the MasterIndex of Retail forecast for the second half of 2004 are as follows:

• China has taken the second spot with retail sales predictions showing an optimistic 12.0% year-on-year growth, closely followed by Taiwan with 10.5% year-on-year growth.

• Other Asia/Pacific markets, while less bullish, yet indicating positive year-on-year growth include; Indonesia (4.3%), Japan (3.9%) and Australia (2.8%).

• Korea continues to see brighter prospects driven by strong growth received exclusively driven by exports. Retail sales forecast for the second half of 2004 is forecasted to grow by 2.4% to reach 65.0 trillion won in value terms.

• Hong Kong, Malaysia and Philippines are predicated to see optimistic retail sectors with anticipated 9.5%, 8.5% and 7.0% year-on-year growth respectively.

Dr. Yuwa Hedrick-Wong, economic advisor, Asia/Pacific, MasterCard International, commented, “The interest rate cycle has started to move up since the Federal Reserve raised interest rates in June. We have seen how the uncertainty related to the new interest rate environment has affected consumer outlook on the stock market in Asia/Pacific in our latest MasterIndex of Consumer Confidence survey. From the point of view of consumer spending and retail sales, however, the outlook is one of continuing strength in the region. Expectations of stronger income growth and better employment conditions clearly have more than compensated for higher interest rate expectations. This bodes well for retailers and the service sector generally.”

Combining 10 years of retail sales data, factoring in the secular trend of growth of the retail industry, GDP outlook, and using the MasterIndex of Consumer Confidence as an independent variable, an estimate of retail sales value is obtained for the same six-month horizon covered by the MasterIndex of Consumer Confidence.

Individual Market Forecasts for Second Half 2004

• Retail sales in Australia are expected to grow to 2.8%, reaching A$79.0 billion in sales value for the six month ahead. Australian consumer confidence saw a slight drop-off (63.4) from its record high six months ago (80.9) in the latest MasterIndex of Consumer Confidence survey. The current MasterIndex score is higher when compared to a year ago (45.3) and the historical average (56.8).

• China’s retail sales are expected to grow to 12.0% for the next half of the year, with sales valued at 2.72 trillion Yuan. China consumers (78.9), although currently less optimistic when compared to six months ago (83.7), are still highly optimistic. At 78.9, the score is higher than the historical average of 71.8.

• Retail sales in Hong Kong for the second half of the year are expected to rise to 9.5% year-on-year to reach HK$93.0 billion. Hong Kong’s MasterIndex of Consumer Confidence score of 71.2 is much higher as compared to a year ago (23.2) and its historical average (46.8). Consumer sentiments on Employment (80.9), the Economy (77.4), Quality of Life (72.2), the Stock Market (68.5) and Regular Income (57.1) are fair to very positive.

• Retail sales in Indonesia for the second half of 2004 are expected to see year-on-year growth reaching 4.3% with sales valued at 123.3 trillion rupiah. Consumer confidence in Indonesia has displayed increased optimism with a score of 67.3, when compared to a period ago (49.0) and year ago (57.5). It is supported by greatly improved consumer sentiments on Employment, Quality of Life, and Economy, Regular Income and an unchanged but slightly optimistic outlook on the Stock Market.

• The forecasted growth in retail sales for Japan is 3.9%, valued at ¥58.7 trillion for the next six months ahead. The MasterIndex of Consumer Confidence for Japan displayed a record high score of 47.6. Consumer confidence is significantly higher than six months ago (31.8), a year ago (17.4) and its historical average (22.7).

• Korea’s retail sales are expected to see a growth of 2.4% to reach $65 trillion won in value terms for the second half of the year. Korean consumer confidence continues to remain somewhat pessimistic at 40.7, with marginally optimistic sentiments on Regular Income. However consumers are pessimistic with regard to Employment, Quality of Life, Economy and the Stock Market.

• Retail sales in Malaysia are expected to see an optimistic year-on-year growth to 8.5%, with a value of RM30 billion for the next six months ahead. Malaysian consumers are highly optimistic (84.0). Although sentiments on Economy, Regular Income, Quality of Life and the Stock Market have somewhat dropped when compared to six months ago, consumer confidence in Malaysia remains buoyant.

• For the second half of 2004, retail sales in New Zealand are forecasted to continue to grow by 6.8% year-on-year, reaching NZ$15.8 billion in value. However according to the latest MasterIndex of Consumer Confidence New Zealand consumers are expected to be less optimistic with a score of 56.5 than they were six months ago. Consumers are highly optimistic about Regular Income and Employment, however, become less optimistic about the Economy, Quality of Life and the Stock Market.

• Philippines’ retail sales are estimated to grow by 7.0% in the second half of 2004. Total sales value is expected to reach 352.3 billion pesos. Philippines received a superior score of 54.8 according to the latest MasterIndex of Consumer Confidence compared to its score in the preceding period of 34.3. The improvement is largely attributed to a very positive outlook on regular income at 80 and a relatively neutral stance on the economy at 53.

• The forecasted retail sales for Singapore are expected to see a 19.0% year-on-year growth, with total sales valued at an estimated S$15 billion for the next six months ahead. Singapore received a score of 71.9 according to the latest MasterIndex of Consumer Confidence with virtually Economy, Regular Income, Employment, Quality of Life and Stock Market have significantly improved.

• Taiwan’s retail sales are also forecasted to growth by 10.5%, with total sales estimated to reach NT$1,555 billion. Taiwan’s current MasterIndex score however displayed a score of 58.6 showing a decline in consumer confidence compared to six months ago. This is caused largely by significantly weaker Stock Market sentiments, softer sentiments on the Economy, as well as slightly weaker expectations of Employment.

• Retail sales for the next six months ahead in Thailand are expected to grow to 9.8%, reaching $952.7 billion baht in value. Thailand’s consumer confidence remains fairly optimistic with a score of 69.2. This is supported by an optimistic outlook on Regular Income, Employment, Economy, Quality of Life and Stock Market.

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