SINGAPORE retail sales dipped 0.1 per cent year on year in October, snapping an eight-month streak of expansion and reversing from the previous month’s upwardly revised 0.8 per cent growth.

This comes amid a deeper contraction in the sales of recreational goods and furniture, data from the Singapore Department of Statistics (SingStat) showed on Tuesday (Dec 5).

October’s result was also a disappointment for private-sector economists, who had expected a 0.2 per cent year-on-year growth, according to a Bloomberg poll. Excluding motor vehicles, retail sales fell 1 per cent year on year, compared with September’s 0.7 per cent growth.

On a seasonally adjusted monthly basis, retail sales shrank by 0.8 per cent in October, easing slightly from the previous month’s 1.6 per cent decline. Excluding motor vehicles, the month-on-month contraction was 1.3 per cent in October, deepening from the 0.9 per cent drop previously.

Total retail sales value in October was at S$4 billion, of which 13.1 per cent came from online sales.

Half the industry registered a year-on-year shrinkage in retail sales.

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The contraction in sales was deepest in the recreational goods industry at 8.1 per cent year on year, due to lower demand for sporting goods, said SingStat. Conversely, food and alcohol sales surged 22 per cent year on year. SingStat said that this was due to higher demand for alcoholic products, including those sold in duty-free shops.

DBS economist Chua Han Teng noted that the robust growth in food and alcohol sales reflects support from Singapore’s ongoing international travel recovery. He noted that the Republic’s overall visitor arrivals in October recovered to about 74 per cent compared to the same period in 2019, even if they came in a tad lower than September’s print.

He added that inbound tourism should recover to pre-pandemic levels in 2024, and this should support overall retail sales.

Maybank economist Brian Lee, however, said that higher prices could be eating into consumers’ purchasing power. “With the strong Singdollar, locals could be spending more abroad or saving more for shopping on overseas trips, such as buying their groceries in Johor or shopping in Japan,” he explained. “This could explain the contraction in sales for supermarkets and department stores in October.”

Lee added that the steep drop in sales of recreational goods suggests that revenge spending has continued to fade.

Still, the year-end festive demand and the government handing out extra cash ahead of a one percentage point hike in the goods and services tax (GST) could add further upside to retail sales, economists said. Consumers may also frontload some of their spending before the GST is raised to 9 per cent in January, they added.

However, external downside risks remain, said UOB economists Alvin Liew and Jester Koh. These include a weakening external environment, greater-than-anticipated easing in domestic/regional labour market conditions, and a slower-than-expected recovery in inbound Chinese tourist numbers.

They noted that while the labour market in Singapore remains tight, there are signs of rising joblessness among the domestic population. “Moderating wage growth alongside incremental uncertainty in the job market may exert some downward pressure on retail sales going forward, especially on big-ticket items like furniture, household equipment, watches and jewellery,” said the UOB team.

UOB is pencilling in a full-year retail sales growth forecast of 3 per cent on the assumption of a “reasonably strong rebound” in the final two months of the year.

Maybank’s Lee said that he expects retail sales to improve to “single-digit growth” in 2024, with cooling inflation and a recovering economy. “Nonetheless, we are wary that inflation may be slow to cool with the GST hike and hikes in other administrative prices like water and public transport fares,” he noted, adding that “elevated-for-longer inflation” could dampen retail sales recovery.

Separately, sales of food and beverage (F&B) services rose 2.4 per cent year on year in October, easing from the 6.9 per cent growth in the previous month. Sequentially, sales of F&B services fell 1.4 per cent, compared with the 1.8 per cent decline in September.

Food caterers saw sales jump 19.9 per cent year on year, while cafes, food courts and other eating places had a 6.2 per cent year-on-year increase in turnover. Takings at fast food outlets inched up 1.1 per cent year on year. In contrast, sales in restaurants shrank 4.7 per cent year on year.