Singapore’s total retail sales value fell 6.1% y-o-y to $3.8 billion in January 2021, according to the Department of Statistics (SingStat) on March 5.

The contraction comes in lower than that of Bloomberg consensus' estimates of -2.5%, according to RHB Group Research.

In comparison, the total sales value in December 2020 fell 3.3% y-o-y to $4.0 million, indicating a 1.8% dip m-o-m, on a seasonally adjusted basis.

The lower retail sales value marks the 24th straight month of contraction.

Of the total sum, online retail sales comprised an estimated 10.3%, lower than the 10.9% recorded in December.

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In January, the lower sales were led by declines in food and alcohol, department stores, and cosmetics, toiletries and medical goods; similar to the declines in October, November and December 2020.

The decline in sales in department stores as well as cosmetics, toiletries and medical goods were attributable to the low visitor arrivals, according to SingStat.

Furniture and household equipment, as well as computer and telecommunications equipment registered the highest y-o-y growth at 25.9% and 24.8% respectively. These were, similar to the month of December 2020, due to higher demand for household appliances and the launch of new mobile phones.

Sales of the motor vehicles, supermarkets and hypermarkets, and recreational goods and industries also grew by between 7.3% and 10.3% in January 2021 over the same period last year.

Excluding motor vehicles, January’s total retail sales value fell 8.4% y-o-y.

M-o-m, on a seasonally adjusted basis, total retail sales value for the month sans motor vehicles fell 2.4%.

Most of the retail industries saw declines in sales on a m-o-m basis.

Sales in optical goods and books fell 10.3% m-o-m mainly due to lower demand for books.

Furniture and household equipment and department stores registered m-o-m declines of 6.3% and 4.9% respectively.

Retails of food and alcohol, motor vehicles and petrol service stations saw m-o-m growths of between 0.7% and 5.1% during the same period.

Meanwhile, sales of food and beverage sales fell 24.7% y-o-y in January to $720 million, compared to the 16.3% decline the month before.

The larger contraction was due to the higher sales in January 2020 during the Chinese New Year period.

Sales of food and beverage sales fell 6.5% m-o-m on a seasonally adjusted basis.

Of the $720 million, online sales in food and beverage comprised 22.1%, higher than the 21.3% recorded in the preceding month.

Within the sector, all industries saw y-o-y declines, led by food caterers at -76%.

Sales of restaurants, cafes, food courts and other eating places, and fast food outlets fell 30.2%, 6.8% and 6.7% y-o-y respectively.

All industries saw declines m-o-m as well, with restaurants seeing the highest dip at -10.1%.

What the economists say

However, there are signs of "improving domestic demand" despite the overall contraction of the index, says UOB economist Barnabas Gan.

"Coupled with the strong growth in furniture, household equipment, telecommunications and computers, sales of motor vehicles expanded 10.3% y-o-y in January 2021, the fastest pace in five months. This is coupled with recreational goods receipts which expanded 7.3% y-o-y (clocking seven straight months of growth)," he observes.

"Similarly, e-commerce demand for goods sold by domestic retailers stayed strong at +75.8% y-o-y in January 2021, reinforcing our view that domestic demand has improved in the new year. Online sales as a share of total retail sales also remained significant at 10.3% in the same month," Gan adds.

Furthermore, Gan notes that there were "strong" y-o-y sales expansions in the computer and telecommunication equipment, furniture and household equipment, as well as supermarkets and hypermarkets industries, suggesting "the ongoing structural shift in retail demand from demand in brick-and-mortar stores to online buying."

While Gan expects retail sales to stay subdued till 1H2021 at least due to the lack of tourism-led demand and weak international travel, interim support such as the Singapore Rediscovers vouchers may provide some short-term relief to retailers.

"We think that the improving domestic demand seen to-date, should it be sustained, could be sufficient to allow a rebound in 2H2021. Barring an unexpected exacerbation of Covid-19 infections in Singapore, we remain cautiously optimistic for retail sales to recover to +1.0% in 2021," he says.

To OCBC's head of treasury research and strategy Selina Ling, February 2021 may see better figures due to the pickup into the Chinese New Year season.

"Nevertheless the capacity and social distancing constraints under Phase 3 remain intact," she says, making it "unlikely to mark a full recovery per se to pre-Covid levels".

"Hence, it would be better to look at the average of the January-February data to overcome the seasonal effects."

For the FY2021, Ling expects retail sales to rebound by 13% y-o-y following a 15.3% y-o-y contraction in FY2020 due to the Covid-19 pandemic and ensuing measures such as the circuit breaker measures from April to June 2020.

"Since Phase 3 will last a longer period of time, the hope is that the accelerated vaccination program roll-out both domestically and globally, this would contribute to some re-opening of international borders later this year and in turn bring some much needed relief to hard-hit local retailers."

The team of economists at RHB has maintained its 2021 GDP forecast of 5.5% y-o-y, same as that of the forecasts from Bloomberg consensus.

While they expect retail sales to rise in the 1H2021, they are cautious of the increase despite the pick-up in domestic demand due to the volatility of the global Covid-19 situation.