Singapore retail sales down 3.4% ending 5-month growth streak

SINGAPORE'S retail sales fell 3.4 per cent year on year in February, reversing from last month's 12 per cent increase and snapping a 5-month growth streak.

The decline in February was attributed partly to lower sales compared to a year ago when sales were boosted by pre-Chinese New Year (CNY) spending, said the Department of Statistics (SingStat) on Tuesday (Apr 5). This year's pre-CNY spending took place mostly in January.

Selena Ling, OCBC's chief economist and head of treasury research and strategy, said some monthly variation and seasonal effects due to the timing of the CNY holidays are to be expected.

"Anyway, this may all be water under the bridge given that the borders reopened and many Covid restrictions relaxed further from Mar 29," she said, adding that the recent announcement of the reopening of the nightlife sector on Apr 19 should bode well for more overseas visitors and therefore encourage further spending in the retail and food-and-beverage sector in the months ahead.

On a month-on-month seasonally-adjusted basis, total retail sales were down 1.2 per cent. The total retail sales value was at S$3.2 billion, with online sales accounting for 13.6 per cent.

Maybank Kim Eng economist Lee Ju Ye noted that retail sales are still below pre-pandemic levels, as categories such as department stores, food and beverages, as well as wearing apparel and footwear have not yet recovered fully due to the absence of tourists and with many still working from home.

Most retail segments declined in February, except for cosmetics, toiletries and medical goods; watches and jewellery; petrol service stations; furniture and household goods; and others.

On a month-on-month seasonally-adjusted basis, most industries recorded declines in sales in February.

UOB economist Barnabas Gan said notwithstanding the year-on-year decline, the latest figures suggest that consumer confidence has remained positive despite the tighter labour market.

He pointed towards the watches and jewellery segment, which rose 8.3 per cent in February and recorded 13 months of consecutive expansion, as well as the furniture and household equipment segment which continued its 6-month streak with a 5.2 per cent increase.

Food and beverage services similarly saw sales fall 0.6 per cent year on year and declined 5.7 per cent on a monthly seasonally-adjusted basis, though most segments recorded growth.

  • Restaurants (-5.7 per cent)
  • Fast food outlets (0.9 per cent)
  • Food caterers (26.3 per cent)
  • Cafes, food courts and other eating places (1.4 per cent)

Looking ahead, the economists expect retail sales to improve in the coming months as Singapore continues to ease its Covid-19 measures and as the labour market continues to see improvements.

Gan believes retail sales will expand by another 6 per cent in 2022. However, he noted that the ongoing geopolitical crisis in Ukraine may add uncertainty and further commodity price pressures.

"Potential front-loading consumer demand in the year ahead could also help retail sales as consumers adjust for the higher goods and services tax rate in 2023. In addition, 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 added.

Lee forecasts retail sales to rise around 4 to 6 per cent in 2022. "The return of tourists following the significant easing of border restrictions starting end-March will also boost sales of discretionary categories including department stores and watches and jewellery," she said.

Meanwhile, Ling expects retail sales to grow by 3.5 per cent in 2022.

"Retail sales should hopefully improve going ahead since the domestic labour market remains healthy, albeit the rising inflation and increasing interest rate environment may start to prompt consumers to consider tightening their belts if the Ukraine war and China slowdown continue to stymie the global supply chain and weigh on business and consumer confidence," she said.

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