Singapore’s retail sales saw a modest year-on-year growth of just 0.6% in September 2023, a significant decline from the revised 4.2% growth reported in August, according to data released by the Department of Statistics (SingStat) on November 3. This figure fell short of Bloomberg’s consensus forecast of a 1.6% expansion, raising concerns about the retail sector’s performance.

On a month-on-month, seasonally adjusted basis, retail sales dropped by 1.6%, reversing from the revised 1.9% increase in August. The ongoing recovery in tourism is pivotal for retail growth, as indicated by UOB economists Alvin Liew and Jester Koh. They noted a decline in visitor arrivals in September and a seasonal drop in Chinese tourist numbers following the summer holidays.

The estimated total retail sales value for September was S$3.9 billion, with online sales contributing 13.5% of this total. Excluding motor vehicles, retail sales increased by 0.5% year-on-year but decreased by 0.8% month-on-month on a seasonally adjusted basis.

Despite the overall slowdown, more than half of the retail categories recorded growth in September. SingStat reported notable double-digit growth in food and alcohol sales, driven by higher demand for alcoholic products, including those sold at duty-free shops. The strong performance in this category reflects the ongoing travel recovery and the positive impact of events like the Singapore Grand Prix.

The cosmetics, toiletries, and medical goods category also experienced a surge in turnover due to increased demand. However, the computer and telecommunications equipment category faced the largest decline, experiencing its most significant drop since late 2020. Analysts attribute this decline to a high base from 2022, when new mobile phone launches spurred sales.

In terms of category performance, petrol service stations recorded the highest month-on-month increase at 4.7%, while motor vehicle sales saw the largest sequential decline.

Looking ahead, UOB revised its retail sales growth forecast for 2023 down to 3% from an earlier estimate of 3.5%. Analysts flagged potential risks, including a weakening external environment, a more significant-than-expected easing in labor market conditions, and a slower recovery of Chinese tourists. Cooling wage growth amid economic uncertainty may impact discretionary spending, particularly on high-value items like furniture and jewelry.

OCBC’s chief economist, Selena Ling, indicated that retail sales growth for the first nine months of 2023 stood at 2.9% and might slow to approximately 1.5% in the fourth quarter, primarily due to a high base from the previous year. This would bring the estimated full-year growth to around 2.7%. However, retail sales are expected to rebound in 2024, with a forecast of about 4% growth as international visitor arrivals and GDP improve.

Chua from DBS noted that the retail trade sector remains optimistic for the October 2023 to March 2024 period, with firms anticipating increased sales during the festive season. Possible front-loading of purchases ahead of an impending goods and services tax hike, along with government support measures, could further bolster retail sales.

In a related development, sales of food and beverage (F&B) services increased by 6.9% year-on-year in September, though this was lower than the 8.6% growth seen in the previous month. Month-on-month, seasonally adjusted sales decreased by 1.7%. Growth was observed across all F&B segments, with notable increases in food caterers (24.1%) and fast-food outlets (5.5%).

F&B service receipts amounted to S$983 million in September, with online sales accounting for approximately 23% of this total.