Economists expect retail sales to return to positive growth by February

SINGAPORE'S retail sales could return to positive growth as early as the first quarter of this year, said economists encouraged by the slowing decline in November's data.

Overall takings at the till fell 1.9 per cent in November, a surprising improvement over October's 8.5 per cent contraction. The Department of Statistics (SingStat) on Tuesday attributed this to multiple mega sales events such as Singles' Day and Black Friday, as well as new mobile phone launches.

On a seasonally-adjusted basis, retail sales grew 7.3 per cent in November from the previous month.

The estimated total retail sales value was about S$3.6 billion, of which 14.3 per cent came from online retail sales, up from the 10.5 per cent in October.

The travel restrictions keeping Singaporeans in the country have played a major role in spurring spending here, economists said. Irvin Seah, DBS senior economist, said: "Despite the safe measures and the fact that this is a recession year, I think Singapore consumers have been rather resilient.

"The crisis has affected some workers and the unemployment rate went up, but it is the low-income group that has borne the brunt. Those in the mid- to high-income brackets have been the key drivers of retail sales in Singapore," he added.

Selena Ling, OCBC chief economist, noted that the double-digit month-on-month jumps seen for department stores and watches and jewellery were indicative of the consumption power of Singaporeans amid the economic recovery.

While most retail industries continued to register year-on-year declines in sales, many logged growth on a seasonally-adjusted month-on-month basis.

The best-performing industry was computer and telecommunications, which grew 29 per cent year on year and 59 per cent month on month.

Coming in second was furniture and household equipment, with a 28.5 per cent year-on-year growth, and 13.4 per cent on a month-on-month basis.

This momentum is likely to continue into December, although analysts were mixed on whether this would taper off into 2021.

Barnabas Gan, UOB economist, believes the retail demand could be attributed to transient factors such as the year-end seasonal buying. He added that it may become lacklustre in the lead-up to the Chinese New Year.

"The outlook for Singapore's retail sales industries continues to be challenging in the absence of tourism-led demand. The resurgence of Covid-19 cases globally, coupled with the new contagious strains seen to date, may mean that international travel could stay weak for a prolonged period," he said.

Jeff Ng, senior treasury strategist at HL Bank, said: "Momentum may taper a little at this stage in January - back to work and post-December domestic 'holidays'. However, Phase 3 is likely supportive of retail sales growth in January and beyond."

Others were more optimistic, given that the increased domestic spending could in part offset the loss in tourist dollars.

DBS' Mr Seah said: "Prior to Covid-19, we had a huge amount of 'leakage' every year because Singaporeans would travel abroad and spend elsewhere. Now they can't, so you see their spending being reflected."

Lee Ju Ye, Maybank Kim Eng economist, said: "The vaccination campaign for the public starting next month will also likely boost confidence, and the return of tourists by the second half of the year could accelerate the recovery."

Regardless, the low base effect from last year's data is likely to bring retail sales back to positive territory, possibly as early as February, Ms Ling and Mr Seah both said.

Mr Ng believes an expansion would come by April - since April 2020 saw a 40.5 per cent plunge - but a return to pre-pandemic levels may take longer, possibly late this year.