Singapore: Retail Sales seen expanding 9.0% in 2022 – UOB

Alvin Liew, Senior Economist at UOB Group, comments on the release of Retail Sales figures in Singapore.

Key Takeaways

“Singapore’s retail sales declined by -1.4% m/m, following 1.8% increase in May, breaking the streak of 3 consecutive months of m/m increase. That translated to a weaker-than-expected 14.8% y/y expansion in Jun (from 17.8% in May), against Bloomberg median forecast of a 18.3% y/y growth. That said, this was still the third consecutive month of double-digit growth. Excluding motor vehicle sales, the m/m decrease was more pronounced at -1.9%, (from 2.7% in May), translating to a +19.8% y/y increase (from 22.6% y/y in May).”

“While the growth fell short of forecast, Jun retail sales growth still added to a solid foundation for domestic demand in the 2Q22, it should be noted that according to the Department of Statistics Singapore, the y/y increase was again distorted by the low base effect of the prior year (Jun 2021) when COVID-19 restriction measures were in place, such as international travel restrictions. The weaker m/m print could also be due to more households on overseas holidays during the school break, leading to lower on-shore expenditure during Jun.”

“Year-to-date, retail sales grew by 10.4% y/y. We believe domestic retailers will likely see domestic and external support, complemented by the return of major events such as the F1 formula night race in Sep. On the flipside, we believe that the elevated commodity price pressures, especially on energy and food prices, will feed into higher retail prices in the next few months and eat into the average household’s disposable income, thereby reducing their spending on discretionary items. Barring the re-emergence of fresh COVID-19 or other health-related risks in Singapore and around the region (leading to re-imposition of social and travel restrictions, which is not our base case), we still project retail sales to expand by 9.0% in 2022 (implying a more conservative forecast of 7.6% growth in 2H 2022). The primary driver is still low base effect which is likely to continue to uplift retail sales growth prints in the coming months.”