Retail sales grew by 12.7% y-o-y in February, reversing the 0.8% y-o-y decline printed in January. The figure was the highest print on a y-o-y basis since August 2022 and surpassed market watchers’ expectations.
Excluding motor vehicles, February’s retail sales grew by 11.7% y-o-y.
On a m-o-m seasonally adjusted basis, total retail sales in February grew by 3.9% to $3.6 billion and 2.0% to $3.1 billion excluding motor vehicles.
The y-o-y growth was partly attributed to a lower base as some shops were not open during the Chinese New Year period in February 2022, says the Department of Statistics Singapore (SingStat). The festival was celebrated at the end of January this year.
Comparing the performance for the two-month period (January to February) of festivities, retail sales registered a year-on-year growth of 4.9%. According to OCBC’s chief economist and head of treasury research and strategy Selena Ling, the figures from the two-month period suggests that the Singapore economy “is in better shape”.
Private consumption across all the industries remained healthy with most reflecting y-o-y growths. The only industry with negative growth was Supermarkets & Hypermarkets at -3.6% as more Singaporeans chose to eat out.
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“Given that the domestic labour market remains resilient and the S&P Global Singapore purchasing manager’s index (PMI) also recovered from 49.6 in February to 52.6 (back in expansion territory and the highest since November 2022) in March, there should be ongoing support underpinning the sector despite the tepid performance of the manufacturing sector due to the global demand slowdown,” says Ling.
In addition, the increase in visitor arrivals, especially with the return of Chinese tourists, should bode well for the services sector and particularly for the industry.
In March, the number of Singapore’s visitors crossed the one-million mark for the first time since the pandemic. March’s numbers brought the total number of visitors to the country to over 2.9 million for 1Q2023.
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“That said, sales saw double-digit growth last year and should moderate to around 3-4% y-o-y this year,” notes Ling, as the Singapore Tourism Board (STB) expects visitor arrivals to recover to their pre-pandemic levels only in 2024.
To UOB’s senior economist Alvin Liew, the better retail sales outturn in February may have been attributable to the higher spending during the Chinese New Year celebrations, which stretched into the month. The better-than-expected figures may also have been due to the improvement in Singapore’s tourism numbers.
This combination has likely benefitted the Food & Alcohol industry, which surged by 69.0% y-o-y. Other industries that benefitted from the above factors include Department Stores, Wearing Apparel & Footwear and Computer & Telecommunication Equipment, which rose by 26.1%, 38.1% and 26.1% y-o-y respectively.
That said, Liew also notes that industries with big-ticket and discretionary retail items such as Watches & Jewellery did not benefit as much, presumably due to the one percentage point GST hike that took effect in January.
Looking ahead, Liew expects to see domestic retailers continuing to enjoy domestic and external support, complemented by the return of major events such as various sports, concerts and BTMICE (business travel and meetings, incentive travel, conventions and exhibitions) activities attracting tourist arrivals, while the tight domestic labour market and wage growth will likely contribute further to domestic consumption demand.
In his view, one of the key downside risks to retail sales during the year is the inflation pressures that have remained elevated. This, in addition to the GST hike and the latest Organization of the Petroleum Exporting Countries (OPEC+)’s decision to cut output thus driving oil prices higher, may increasingly curb the discretionary spending of households.
“The low base effect is also likely to fade going into the new year, rendering less uplift,” says Liew.
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Upsides, on the other hand, include recovery in tourism, which will benefit many in-person services sectors.
That said, Liew still expects to see a “significant influx” of Chinese tourists and their related spending in the subsequent months.
“As such we maintain our 2023 retail sales growth forecast at 5.0% with the upside potential to our forecast mainly due to China,” he writes.
