Retail Sector Faces Weakening Growth Amid Declining Tourist Arrivals and Seasonal Trends
Singapore’s retail sales growth in September slowed to just 0.6% year-on-year, significantly below the expected 1.6% expansion and a sharp drop from August’s revised 4.2% growth. The disappointing performance follows a seasonally adjusted month-on-month decline of 1.6%, reversing the previous month’s positive growth.
A key factor for the slowdown is the ongoing recovery in tourism, which has been vital for the retail sector’s rebound. In September, the number of visitor arrivals continued to decline, and there was a seasonal drop in the influx of Chinese tourists following the summer holidays. Despite this, retail sales for the month amounted to S$3.9 billion, with online sales contributing 13.5% of the total.
When excluding motor vehicles, retail sales increased by just 0.5% compared to the same month in the previous year, though the sector experienced a sequential decline of 0.8% month-on-month. Among the categories, food and alcohol sales saw significant growth, driven by higher demand for alcoholic beverages, particularly in duty-free shops, linked to the recovery in tourism and events like the Singapore Grand Prix.
However, the largest decline was recorded in the computer and telecommunications equipment category, which experienced its sharpest drop since late 2020. This downturn was attributed to the high sales base of 2022, driven by the launch of new mobile products that did not repeat in 2023.
Looking ahead, analysts from UOB have downgraded their retail sales growth forecast for 2023 to 3% from an earlier projection of 3.5%, citing risks such as a weakening external environment and a slower-than-expected recovery in inbound Chinese tourism. In particular, they highlighted how subdued wage growth and economic uncertainty could dampen consumer spending, especially on luxury or big-ticket items like watches and furniture.
Despite these challenges, the outlook for 2024 remains more optimistic, with retail sales expected to pick up to a 4% year-on-year growth, supported by improved international visitor arrivals and GDP growth.
In contrast, Singapore’s food and beverage (F&B) services experienced stronger performance, with sales increasing by 6.9% year-on-year in September. This was a slight slowdown from August’s 8.6% growth, but still robust across all F&B segments. Online sales in the F&B sector accounted for approximately 23% of the total receipts of S$983 million.
As the year progresses, analysts anticipate a boost to retail sales from upcoming festive season spending, potential front-loading of purchases before a planned goods and services tax hike, and government support packages expected in late 2023 and early 2024.
