SINGAPORE’S retail sales dipped 0.8 per cent on the year in January, mainly on lower motor vehicle sales that corresponded with the lower Certificate of Entitlement quota, Department of Statistics (Singstat) data showed on Friday (Mar 3).

This marked a reversal from December 2022’s 7.7 per cent growth. If not for motor vehicle sales, retail sales would have been up from the year-ago period in January.

The goods and services tax (GST) hike from 7 per cent to 8 per cent at the start of the month likely also contributed to the contraction, with consumers front-loading spending on big-ticket items last year, economists said.

December saw a record high total sales value of S$4.73 billion, UOB senior economist Alvin Liew reiterated. The total retail sales value was S$4.2 billion in January, with online sales accounting for 11.5 per cent, lower than the 13 per cent recorded in December.

OCBC chief economist Selena Ling and Maybank economist Lee Ju Ye added that the year-on-year comparison may also be complicated by 2023’s earlier Chinese New Year festive season.

Despite the negative start, economists continue to expect retail sales growth to remain positive this year, even as it likely eases.

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On a seasonally-adjusted monthly basis, retail sales dropped 9.4 per cent, reversing from the previous month’s 1.3 per cent expansion.

Excluding motor vehicles, retail sales expanded by 2.1 per cent from the year-ago period, narrowing from 9.8 per cent in December. On the month, seasonally adjusted, it shed 8.2 per cent, against the 1 per cent growth on the month in December.

Slightly more than half of retail sales categories posted year-on-year growth.

On a month-on-month seasonally-adjusted basis, most categories monitored recorded falls. Sales of food and alcohol, furniture and household equipment and motor vehicles declined the most.

Recreational goods, computer and telecommunications equipment and optical goods and books were the only categories to register increases on the month.

Spending for these “experiential and more affordable items” has continuously increased, in contrast to the “significant decline” in big-ticket-item spending, noted Prof Li Xiuping, associate professor at the Department of Marketing at NUS Business School.

Liew added that the growth could be because of the start of the new school and work year, making these items more inelastic in demand despite the GST hike.

Sales of food and beverage services rose 21.8 per cent year on year and 2 per cent on a monthly seasonally-adjusted basis, with year-on-year growth across all segments.

• Restaurants (21.7 per cent)

• Fast food outlets (18.7 per cent)

• Food caterers (110.2 per cent)

• Cafes, food courts and other eating places (11.5 per cent)

Singstat attributed the jump in readings for food caterers to higher demand for both event and in-flight catering with the easing of restrictions on large-scale events, international travel as well as social gatherings. Looking ahead, other than the GST hike and “demand fatigue” from front-loading, still-elevated inflation may curb discretionary spending, higher base prints and uncertain economic and geopolitical conditions could lead to softer retail sales growth this year, economists agreed.

RHB senior economist Barnabas Gan expects retail sales momentum to decelerate in H1. But he added that enhanced GST voucher payouts and one-off support measures from Budget 2023 may cushion downside risks.

On the upside, “some reprieve may be seen in tourism-related products” and hospitality industries, Gan said. Liew noted that the continued return of major events, business travel and meetings, incentive travel, conventions and exhibitions activities will attract tourists.

China’s reopening is key to the tourism-led recovery. Its impact was not immediately visible in January, possibly due to limited flights and the proximity to the Chinese New Year, Liew said. But he expects a “significant influx” of Chinese tourists and related spending in the coming months.

Economists also highlighted the resilient labour market and wage growth. But whether Singaporeans spend overseas or locally, and whether they allocate more to essentials due to inflation rather than discretionary items, remains a question, said Ling.

For 2023’s full-year retail sales growth, RHB’s Gan projects a 6 per cent rate, UOB’s Liew predicts it will come in at 5 per cent, while Maybank’s Lee estimates it will hit between 1 and 4 per cent.

Ling said: “The key question is whether private consumption and tourist spending which have softened due to the global growth slowdown will be sustained, or will re-accelerate in the coming months as global recessionary concerns fade and overseas visitors, especially Chinese tourists, come back in a bigger fashion.”