Singapore: Retail Sales extend the firm note – UOB

Alvin Liew, Senior Economist at UOB Group, comments on the latest results from Retail Sales in Singapore.

Key Takeaways

“Singapore’s retail sales continued to rise in Oct but by a more subdued 0.1% m/m SA, 10.4% y/y (from 3.2% m/m, 11.3% y/y in Sep), but it was still the seventh consecutive month of double-digit on-year growth. Excluding motor vehicle sales, the m/m increase was more pronounced at +0.8%, (but still a significant slowdown from 4.1% in Sep), translating to a 14.3% y/y increase (from 16.9% y/y in Sep).”

“Delving into the details of the latest retail sales growth, five of the 14 main segments recorded m/m decreases in Oct, up from four in Sep. As for the Oct y/y increase, it was due to larger growth in some retail sales segments including wearing apparel & footwear, food & alcohol, department stores and watches & jewellery. The estimated total retail sales value rose further to S$4.0 bn (from a decent S$3.8bn for Sep) and continued to signal an improving domestic retail and F&B environment in tandem with a tighter labour market, pent-up demand from the re-opening and more importantly, a return of tourist demand.”

“Outlook – Year-to-date, retail sales grew by 11.3% y/y. We continue to expect domestic retailers to enjoy domestic and external support, complemented by the return of major events such as various sports, concerts and BTMICE activities (Business Travel and Meetings, Incentive Travel, Conventions and Exhibitions) attracting tourist arrivals, while the tight domestic labour market will also contribute to domestic consumption demand. End-year festive demand is another positive. Importantly, households will likely front-load big ticket item purchases in Nov and Dec ahead of the GST hike from 7% to 8% on 01 Jan 2023."

"The key downside is elevated inflation pressures that may increasingly curb discretionary spending of households. The low base effect is also likely to fade going into 4Q 22, rendering less uplift. Barring the re-emergence of fresh COVID19 or other health-related risks in Singapore and around the region (leading to re-imposition of social and travel restrictions, which is not our base case), we continue to project retail sales to expand by 10% in 2022 which implies a more moderate forecast of around 6.0% retail sales growth in 4Q22. That will help support our projected 2.5% y/y services growth for 4Q 22. We have conservatively penciled in a 2.3% retail sales growth for 2023."