Singapore retail sales up 8.7% in March, reversing February’s decline

SINGAPORE'S retail sales rose 8.7 per cent year on year in March, reversing the previous month's decrease of 3.5 per cent - coming as a surprise to economists as market consensus came in at a much slower 0.7 per cent growth prediction. 

The increase in March was attributed partly to larger growth in industries such as computer and telecommunications equipment, wearing apparel and footwear, as well as cosmetics, toiletries and medical goods, said the Department of Statistics (SingStat) on Thursday (May 5).

The advance in retail sales suggests that Singapore’s domestic retail environment has improved in tandem with a tighter labour market and is consistent with the uptick in other high-frequency data suggesting that the Republic’s economic growth remains resilient in 2022, said UOB economist Barnabas Gan.

“For the year ahead, we expect that domestic retailers will likely see some support as borders continue to reopen, while further economic recovery would be a linchpin for domestic retail demand. Barring the exacerbation of Covid-19-related risks in Singapore and around the region, we pencil retail sales to expand by 6 per cent in 2022,” Gan noted.

Potential front-loading of consumer purchases this year could also help retail sales as consumers adjust for the higher goods and services tax in 2023, he added.

March’s retail sales grew much stronger than anticipated, and sales remained brisk even as faster inflation was expected to dent some demand, said Nicholas Mapa, senior economist at ING.

GET BT IN YOUR INBOX DAILY

Start and end each day with the latest news stories and analyses delivered straight to your inbox.

Sign UpVIEW ALL

The “upside surprise” suggests that Q1 gross domestic product could be revised higher as sales remained robust despite a pickup in inflation, he added.

On a month-on-month seasonally adjusted basis, total retail sales were up 7.5 per cent. The total retail sales value was S$3.9 billion, with online sales accounting for 14.9 per cent.

Most retail segments saw year-on-year growth in March, except for motor vehicles, recreational goods, optical goods and books, as well as mini-marts and convenience stores. Motor vehicles saw the biggest fall of 14.1 per cent year on year.

The top 5 segments that saw the highest year-on-year growth are:

• Computer and telecommunications equipment (27.3 per cent)

• Wearing apparel and footwear (25.8 per cent)

• Cosmetics, toiletries and medical goods (25.2 per cent)

• Petrol service stations (23.9 per cent)

• Food and alcohol (19.6 per cent)

Excluding motor vehicles, retail sales were up 13.4 per cent year on year, and up 8.3 per cent on a month-on-month seasonally adjusted basis.

Food and beverage services (F&B) rose 4.7 per cent year on year, with the total sales value at $806 million. Sales for food caterers saw the highest increase of 50.3 per cent.

Singapore started easing most of its Covid restrictions from Mar 29, while border restrictions started easing from Apr 1. 

CIMB economist Song Seng Wun noted that as people are able to gather in larger groups and travel more freely, retail sales will increase in the coming months with more consumer spending, especially for the F&B sector.

On a month-on-month seasonally adjusted basis, all categories recorded growth, except cosmetics, toiletries and medical goods, which remained unchanged. 

However, there are risks posed by global ongoings, such as the Russia-Ukraine conflict which brings downside to growth and an increased inflation outlook, thus dampening the recovery in consumption demand, Gan said.

“Higher inflation rates especially led by crude oil and food (which may be made worse by geopolitical developments) may continue to lift retail prices especially in H1 2022, underlining some nominal price effects for the subsequent readings," he noted.

With inflation expected to accelerate in the near term, ING's Mapa believes that retail sales growth may eventually lose some momentum.

“A projected slowdown in global trade could also weigh on consumer sentiment, yet another factor that could dampen retail sales in the near term,” he added.