Singapore reports disappointing 1.1% rise in June retail sales

SINGAPORE’S retail sales rose 1.1 per cent year on year in June, slowing from the previous month’s 1.8 per cent rise, data from the Department of Statistics (SingStat) showed on Friday (Aug 4).

June’s figure was also lower than the median 2.1 per cent rise expected by private-sector economists polled by Bloomberg.

RHB senior economist Barnabas Gan noted that the decline in retail sales momentum was in tandem with the slowdown in tourist arrivals.

“A potential technical recession in the first half of 2023... may also underline the relatively lacklustre consumer-led retail demand over the same period,” he added.

Nevertheless, economists still expect retail sales to pick up steam in the second half of the year, supported by further recovery in tourism arrivals – especially given the return of Chinese tourists – as well as upcoming large-scale events and meetings, incentives, conventions and exhibitions (Mice) activities.

DBS economist Chua Han Teng also noted that, in the latest business expectations survey, the retail trade sector was positive on the outlook for H2 2023.

The string of high-profile concerts from July, and the Formula 1 night race in September, are likely to further boost leisure, business travel and inbound tourism in H2, said UOB senior economist Alvin Liew in a research note.

Some front-loading of consumer demand, especially towards the end of the year, in anticipation of the goods and services tax hike to 9 per cent next year, will also help to support retail sales, noted Gan. A similar phenomenon was seen in the fourth quarter of 2022, ahead of this year’s tax increase to 8 per cent.

Still, consumer spending may face pressure from a softer labour market amid global economic uncertainty, according to Chua.

Other downside risks include the still-elevated inflation pressures – especially on food and transport – which may curb the discretionary spending of households, and a slower-than-expected return of inbound Chinese tourists, said Liew. He maintained his full-year retail sales forecast of 5 per cent for 2023.

On a month-on-month seasonally adjusted basis, retail sales fell 0.8 per cent, extending May’s contraction of 0.2 per cent.

June’s estimated total retail sales value was S$3.8 billion, with online sales accounting for 12.7 per cent.

Excluding motor vehicles, retail sales expanded 2.5 per cent from the year-ago period and rose 0.2 per cent from the previous month, on a seasonally adjusted basis.

“Retail activity continued to benefit from the ongoing international travel recovery, as reflected from the still-robust food and alcohol sales,” said DBS’ Chua. Food and alcohol was the strongest retail sales category in June, growing at a double-digit rate of 30.7 per cent year on year.

Almost all other retail sales categories recorded year-on-year gains in June. The exceptions were department stores, motor vehicles, and petrol service stations.

On a month-on-month seasonally adjusted basis, about half the retail sales categories recorded sales declines, while the other half gained.

Food and beverage services sales expanded 7.2 per cent year on year in June, but fell 2.2 per cent on a monthly seasonally adjusted basis. Year-on-year growth was recorded across all segments:

• Restaurants (1.2 per cent)
• Food caterers (28.9 per cent)
• Fast food outlets (13.4 per cent)
• Cafes, food courts and other eating places (6.7 per cent).