Singapore’s retail sales for the month of March expanded 8.7% y-o-y, reversing from the 3.5% y-o-y contraction in February.
The expansion surprised on the upside, surpassing the much slower 0.7% y-o-y estimate pencilled in by market watchers.
The increase was partly attributed to larger growths in the computer & telecommunications equipment, wearing apparel & footwear and cosmetics, toiletries & medical goods industries.
"The advance in retail sales suggests that Singapore’s domestic retail environment has improved in tandem with a tighter labour market. More importantly, the decline in February was short-lived, and was largely seasonal due to Chinese New Year (CNY),” says UOB economist Barnabas Gan.
While most of the industries within the retail sector saw y-o-y growth, the motor vehicles, optical goods & books and mini-marts & convenience stores saw the highest y-o-y declines.
Of the total sales value of $3.9 billion, 14.9% of sales were made online. The higher online sales proportion was attributed to the promotional events that took place in March.
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Excluding motor vehicles, total retail sales expanded by 13.4% y-o-y.
On a seasonally adjusted month-on-month (m-o-m) basis, total retail sales grew by 7.5% and 8.3% excluding motor vehicles.
“The advance in retail sales is consistent with the uptick in other high-frequency data, suggesting that Singapore’s economic growth remains resilient in 2022. We note that industrial production expanded above market expectation at 3.4% y-o-y in March, led by the transport engineering cluster which grew 20.7% y-o-y on the back of higher production of aircraft parts and offshore projects activities,” says Gan.
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“Meanwhile, sustained demand from 5G markets and data centres supported the semiconductor segment in the electronic cluster. Moreover, manufacturing Purchasing Managers’ Index (PMI) reported by SIPMM rose 0.2 point to 50.3 in April. This is the 22nd straight month where PMI is above the expansionary 50.0 mark,” he adds.
For the year ahead, the analyst from UOB expects retail sales to “stay supported”, in line with the positive economic outlook although the ongoing geopolitical situation could add uncertainty.
“We remain of the view that potential front-loading of consumer purchases this year could also help retail sales as consumers adjust for the higher GST rate in 2023,” says Gan. “In addition, higher inflation rates especially led by crude oil and food (which may be made worse by geopolitical developments) may continue to lift retail prices especially in 1HFY2022, underlining some nominal price effects for the subsequent readings.”
On this, Gan is estimating that Singapore’s retail sales will expand by another 6.0% in 2022 on the back of further economic recovery.
Nicholas Mapa, senior economist at ING says the upside surprise could see Singapore’s GDP for the 1Q2022 being lifted as sales remain robust despite a pickup in inflation.
“However, with inflation expected to accelerate in the near term (core inflation could hit 3.5%) we believe that retail sales growth may eventually lose some momentum. Furthermore, a projected slowdown in global trade could also weigh on consumer sentiment, yet another factor that could dampen retail sales in the near term,” he writes.
Food and beverage sales
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Sales of food and beverage services grew by 4.7% y-o-y and 8.0% m-o-m to a total sales value of $806 million.
Of the sum, 30.4% were made online.
All industries within the food and beverage sector recorded y-o-y increases, led by the 50.3% y-o-y surge in food caterers. This was due mainly to higher demand for in-flight catering with the opening of international borders.
All industries within the food and beverage sector also logged m-o-m growths.
