Retail sales dropped 2.8% in 2019

Motor vehicle sales sharply fell 11%, the lowest in three years.

Singapore’s retail sales fell 3.4% YoY in December 2019, registering a soft end to 2019 when retail sales contacted for the second year by 2.8% YoY. Excluding motor vehicles, retail sales rose 0.1% yoy after two months of contraction.

This data print marked the first back-to-back annual contraction in retail sales since the post-Global Financial Crisis (GFC) period in 2009-2010, noted Selena Ling, head of treasury research & strategy, Global Treasury, at OCBC Bank.

The main drag was motor vehicle sales which slumped 24.1% YoY in December, bringing the full-year auto sales to -11% YoY (the worst since 2015). Other underperforming retail segments included furniture & household equipment (-8.2% YoY), telecommunication & computers (-6.3% YoY) and department stores (-5.6% YoY).

However, UOB economist Barnabas Gan noted that the rise in cross-border demand from Singapore consumers (which shifted demand away from domestic purchases) is the most probable factor for December’s retail softness. "This is seen especially in the fall in demand for retail goods that are easily substitutable with cross-border purchases, whilst expensive goods (such as jewellery) as well as domestically-located brick-and-mortar (supermarkets, provision & sundry shops, petrol service stations etc) saw higher retail sales value. These suggest that consumer demand in Singapore continued to stay buoyant despite the growth headwinds in 2019."

In contrast, the medical goods & toiletries segment may remain supported given the rush to purchase surgical masks, hand sanitizers and thermometers/thermal scanners, Ling said.

As of December 2019, online sales accounted for about 6.8% of total retail sales. “The shift from physical window-shopping to online e-commerce sales may grow under the current environment where people shun crowded places,” she added.

OCBC Bank remains bearish in the near future. The Singapore Tourism Board (STB) has recently warned that Singapore is losing up to 20,000 visitors per day due to the coronavirus outbreak and may see a 25-30% fall in visitor arrivals this year, which will be worse than the 19% decline in 2003 during SARS. “Our 2020 retail sales growth forecast remains tepid at -1.0% YoY,” Ling said.

Gan echoed this and noted that travel advisories from other economies including South Korea, Taiwan, Kuwait, Qatar, Israel, and the UK had also emerged subsequently in discouraging travel plans to Singapore. Taking the preliminary tourism receipt estimates at $27.1b in 2019 , and assuming a share for share reduction of 25-30% of tourism arrivals, Singapore could see a fall of between $6.8b - $8.1b of tourist receipts in 2020," he said.