Rising domestic demand to buoy full-year retail sales

Numbers are still down from a year earlier, but at a slower pace than in June.

The return of domestic consumer demand following the easing of restrictions is set to cushion the rate of contraction in Singapore’s retail sales for the rest of 2020, according to a media note by UOB Global Economics and Market Research. 

Retail sales fell 8.5% YoY in July, a smaller decline than the 27.5% contraction recorded in June. Similar to June, sales surged 27.4% in July compared to the month before, suggesting that retail demand may be gradually improving post circuit breaker, noted Barnabas Gan, economist, UOB Global Economics & Market Research.

Notably, online sales as a share of total retail sales has fallen to its lowest in four months at 11%. This suggested that some consumers may have gradually returned to shopping at the brick-and-mortar shops, in contrast to online shopping, according to Gan.

Despite this, online sales in real terms have already skyrocketed 79.8% as of July, an elevated level compared to 2019’s average of 12.8%.

Gan expects Singapore’s retail sector to recover, albeit slowly given the absence of tourism demand.

“Barring a re-introduction of social-distancing measures, the return of domestic consumer demand should also cushion the rate of contraction on a year-on-year perspective for the rest of 2020,” Gan said.

However, UOB and Gan still downgraded their outlook to a 15% full-year contraction, from only 5% previously. This was due to the extent of decline (-22.1%) in the first seven months of 2020.

Win some, lose some
August’s retail sales were pushed up thanks to sustained demand for groceries and digital solutions due to the work-from-home arrangements lifted sales in Supermarkets & Hypermarkets, Computer & Telecommunications Equipment, and Mini-marts & Convenience Stores.

Further, sales of furniture & household equipment and recreational goods bucked the past months of decline and turned positive in July.

But the negative impact brought by the pandemic continues to be felt by other retail segments. Sales in departmental stores continued to contract for its 11th straight month, coupled with double-digit contractions in the sales of food & beverages, wearing apparels & footwear, watches & jewellery, optical goods & books and motor vehicles.

Within the food & beverage (F&B) sector, the continued absence of event catering further depressed sales of F&B services, which reported a 25.4% fall compared to a year earlier. Poor turnovers at F&B establishments given safe distancing requirements also pushed down sales.