Analysts from UOB Global Economics & Markets Research, as well as from RHB Group Research are still positive about the outlook of Singapore retail sales, despite momentum slowing in August.
Singapore’s retail sales numbers fell 1.3% m-o-m in August, down from a 0.7% rise in July. This was led by retail sales excluding motor vehicles, including recreation goods (7.9% lower m-o-m) computer & telecommunication equipment (5.1% lower), and food & beverages (4.4% lower).
On a y-o-y basis, retail sales saw a 13% y-o-y expansion for August, the fifth consecutive month of double-digit growth.
Excluding motor vehicle sales, the m-o-m decrease was at 1.8%, compared to a 0.6% rise in July. This translates to a 16.2% y-o-y increase, although this is still lower than the 18.4% y-o-y increase in July.
UOB analyst Alvin Liew and RHB’s Barnabas Gan note, however, that this 13% figure falls short of Bloomberg’s estimates, which stood at 15.4% y-o-y.
The way RHB’s Gan sees it, retail sales in 4Q2022 will depend on the recovery in tourism and the labour market. Hence, he maintains his retail sales growth outlook at 10% in 2022.
Gan notes that online sales growth momentum rose for its second month to 4.1% in August 2022, up from 2.3% in July, which is the highest pace since October 2021.
He identifies that Singapore’s tight labour market - with unemployment at 2.1% - may have been a driver behind the pickup in online sales momentum in August.
Despite this, UOB’s Liew says that this is still a “solid foundation” for domestic demand in 3Q2022.
“While we note that most of the main segments recorded m-o-m declines in August, that could likely be some element of normalisation after the strong post-reopening in April surge from pent-up demand,” he adds.
Year-to-date (ytd), retail sales grew by 11.2% y-o-y, and Liew believes that domestic retailers will likely see continued domestic and external support.
He points out that the return of major events such as the F1 night race, concerts and meetings, incentives, conferences & exhibitions (MICE) activities will attract tourist arrivals, while the tightening domestic labour market will also contribute to domestic consumption demand.
Liew says, however, that the low base effect is likely to continue to uplift retail sales growth prints in the coming months.
He forecasts retail sales to expand by 8.5% in 2022, barring the re-emergence of fresh Covid-19 outbreaks or other health-related risks in Singapore and around the region (leading to re-imposition of social and travel restrictions.