Experts cut retail sales growth forecast to 3.0% in 2023

Year-to-date, retail sales have grown 2.9%.

UOB has downgraded its retail sales growth forecast to 3.0% from 3.5%, citing three downside risks.

In a report, experts from UOB said the weakening external environment, greater-than-anticipated easing in domestic and regional labour market conditions, and a slower-than-expected recovery of inbound Chinese tourists may affect retail sales for the rest of the year.

Data from the Ministry of Manpower (MOM) showed that in 3Q23, the labour market softened.

“In the latest 3Q23 advance labour market release, there were further signs of softening in the labour market although it remains tight on historical comparisons, “ Alvin Liew, senior economist of UOB, said.

In 3Q23, overall (2.0%) and resident (2.8%) unemployment rates remained unchanged, whilst the citizen unemployment rate saw an uptick to 3.0%. 

Liew added that business expectations also worsened in September as the proportion of firms with intention to hire fell to 42.8%, below the 52.2% level seen during the pandemic.

On the flip side, Liew said retailers will continue to enjoy “some level of domestic and external support, complemented by major events such as various sports, popular concerts and BTMICE (Business Travel and Meetings, Incentive Travel, Conventions and Exhibitions) activities.”

Jester Koh, associate economist of UOB, said the $1.1b Cost-of-Living Support Package of the government may help lift retail sales.

Koh added that consumers may also front-load some of their spending, particularly on big-ticket items, ahead of the second tranche of GST increase from the current 8% to 9% on 1 Jan 2024.