Retail sales in Singapore are expected to return to pre-pandemic levels by the end of this year, according to RHB Group Research economist Barnabas Gan, who has forecast a 10% y-o-y growth in retail sales for 2022, from the 11.1% expansion that was posted in 2021.
Already, Singapore is showing signs of improvement. Singapore’s retail sales expanded by 17.8% y-o-y in May, marking a third consecutive month of increase. Retail sales excluding motor vehicles surged 22.6% y-o-y while motor sales dipped 13.4% y-o-y. This growth was primarily led by higher spending in departmental stores and in selected discretionary goods such as wearing apparel & footwear, watches & jewellery, as well as recreational goods.
“Key drivers for retail sales in Singapore include the tight labour market seen year to date, whilst the gradual reopening of Asia’s borders should support tourism-led spending,” Gan writes.
As at April, Singapore’s unemployment rate is at 2.2% compared to October 2020’s high of 3.6%. Inbound tourism has also increased significantly to 418,000 visitors in May, from 57,000 at the start of the year.
“On the back of domestic demand and tourism-led spending, we think retail sales from an index perspective will likely return to pre-Covid levels by the end of this year,” says Gan.
Support for retail sales in Singapore may also stem from online demand, with online sales expected to remain sizeable in the year ahead, although consumer behaviour shifts towards bricks-and-mortar shops could see softer demand for online shopping in 2H2022, writes the economist.
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Online sales as a percentage of total retail sales declined to 12% in May — the lowest since April 2021 — with online sales momentum decreasing by 3.5% in April 2022 and 3.7% in May on a 3MMA basis, suggesting that the shift in consumer behaviour away from online buying is already in motion, according to Gan. Online sales across essential products have moderated in May, namely in computer & telecommunication, furniture & household equipment and supermarkets.
For the overall retail sales — both online and offline — Gan expects to see some front-loading effects this year in response to the expected Goods & Services Tax (GST) hike effective Jan 1, 2023.
Caveats to RHB’s optimistic outlook for retail sales in Singapore could arrive from any unexpected worsening of the Russia-Ukraine conflict and China’s economic slowdown.
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On the other hand, DBS is expecting the resumption and the strong line-up of Singapore’s meetings, incentives, conventions and exhibitions (Mice) industry to support the growth of the retail industry moving forward. It notes that retail sales for May saw food & alcohol spending increase by 8.3% m-o-m, while recreational goods were up 12.2% m-o-m.
According to analytics firm Cirium à Tourist, Singapore is among the most popular destinations within the region for international tourists and hence DBS believes that the numbers could continue to rise in the upcoming winter season.
Some retail REITs and stocks that DBS has set its eyes on include Frasers Centrepoint Trust (FCT), CapitaLand Integrated Commercial Trust (CICT), Suntec REIT and Genting Singapore.
Photo: The Edge Singapore/ Albert Chua
