Retail sector faces contraction amid weaker demand and higher inflation expectations
In October 2023, Singapore’s retail sales saw a 0.1% decline year-on-year, reversing the previous month’s growth of 0.8%. This marked the end of an eight-month streak of positive growth in the sector, according to data from the Singapore Department of Statistics (SingStat).
The fall was attributed to a deeper contraction in sales of recreational goods and furniture, though food and alcohol sales posted significant growth, up by 22% year-on-year. The latter was driven by the recovery in international travel and higher demand for alcoholic products, especially those sold in duty-free shops.
On a seasonally adjusted monthly basis, retail sales contracted by 0.8% in October, improving slightly from the previous month’s 1.6% decline. Excluding motor vehicles, sales fell by 1% year-on-year, compared to a 0.7% increase in September.
Despite the overall decline, economists noted the strong performance of the food and alcohol segment as indicative of the continued rebound in tourism, with inbound visitors to Singapore reaching 74% of pre-pandemic levels.
However, consumer purchasing power may be under pressure due to higher prices and the strong Singdollar, which has led some locals to shop abroad. Additionally, the decline in recreational goods sales points to a fading of revenge spending from the pandemic era.
Looking ahead, economists remain cautiously optimistic, predicting that retail sales may pick up toward the year-end due to festive demand and preemptive spending before the upcoming GST hike in January 2024. However, concerns about rising unemployment, moderating wage growth, and potential risks from a slower-than-expected recovery in inbound Chinese tourists could weigh on consumer confidence and retail spending in the months to come.
