Retail sales flatline in July but expects rebound in H2

However, outside factors like negative job market conditions could put a drag on its growth.

Singapore’s retail sales increased by 1.1% YoY in July, a slight uptick from 1% in June the previous month however analysts still expect the sector to rebound in H2 amidst recovery of the tourism sector.

Growth in retail sales was attributed mostly to the sale of motor vehicles. Excluding motor vehicle sales, retail sales fell by 1.1% MoM translating to a milder YoY increase of 0.4%  In nominal terms, the value of retail sales rose to $3.94b.

According to UOB’s senior economist, Alvin Liew, ongoing recovery in the tourism sector will be the key factor to support retail sales growth for the rest of the year. 

The latest data from the Singapore Tourism Board said that visitor arrivals jumped to 1.42 million in July from 1.13 million in June, the highest reading so far in 2023.

“We continue to expect retailers to enjoy some level of domestic and external support, complemented by major events such as various sports, popular concerts and BTMICE activities. In particular, a string of popular concerts and the upcoming Formula 1 Singapore Grand Prix from 15-17 September will further boost leisure, business travel and tourism in H2 2023, whilst robust employment and resilient wage growth could keep domestic consumption demand supported,” Liew said.

RHB’s senior economist, Barnabas Gan also expects stronger retail sales in the second half of the year led by the tourism sector’s recovery. He also said seasonal factors in the second half of the year are also credible evidence for a pickup in retail sales.

“We observe several key retail events scheduled in H2 2023, including Black Friday, Single’s Day (November), and Christmas (typically in December). Meanwhile, the upcoming Formula 1 Night Race scheduled from 15 to 17 September 2023 will typically support tourism arrivals and overall retail spending in Singapore. These factors have historically boosted retail sales, except during COVID-19, in Singapore’s brick-and-mortar stores and online platforms and could continue to attract foreign inbound visitors into Singapore in H2 2023,” Gan said.

Despite this, Jester Koh Associate Economist at UOB that there are still some potential challenges for retail sales in H2 2023.

“Downside risks to retail sales in H2 2023 include a more cautionary external environment, easing in labour market conditions like slowing wage growth; an uptick in unemployment and underemployment rates; weaker hiring sentiment across sectors, and a slower than expected return of inbound Chinese tourists. Given the recent softening in retail sales prints and elevated prices, especially on food and transport, which increasingly weigh on household spending, we downgrade our 2023 retail sales growth forecast to 3.5% from 5%,” Koh said.