Singaporean retail sales contract in July, online retail sales likely to contribute higher in medium term

Singaporean retail sales contracted surprisingly in July. On a year-on-year basis, retail sales shrank 2.6 percent, reversing the revised 2.2 percent growth recorded in the prior month. Sequentially, retail sales dropped 2.9 percent, as compared with the growth of 1.3 percent in June. This is the softest on-year reading since January 2018, when retail sales dropped 7.7 percent year-on-year, and also the lowest July reading since 2013, as well as below the expectations for 1.9 percent year-on-year, noted Selena Ling, Head of Treasury Research & Strategy, OCBC Bank.

The contraction was mainly driven by autos whose sales shrank 15.2 percent year-on-year and 19.5 percent sequentially, even though COE premiums had reached a year-to-date low at the 4 July tender. Moreover, sales for computer & telecommunications equipment, optical goods & books, food retailer, department stores and supermarkets & hypermarkets also fell in July.

Stripping autos, retail sales grew 0.2 percent in July on a year-on-year basis. This is a bit slower than the upwardly revised 0.3 percent year-on-year print seen in June. Sales rebounded for petrol service stations, furniture & household equipment and medical goods & toiletries.

There appears to be no sign of light at the end of the retail sales tunnel for now, even if visitor arrivals had reached a record high of 1.73 million in July 2018, said Selena Ling.

The retail sales data for the month of July implies that the Great Singapore Sale is having a more muted impact on drumming up sales. The U.S. also imposed additional tariffs on USD 34 billion of Chinese imports that came into effect in early July, so it is plausible that market concerns regarding U.S.-Sino trade tensions might have also diminished consumer sentiments.

“At this juncture, online retail sales contributed only about 4.4 percent of total retail sales value in July. However, we would expect that this figure is very likely to increase in the medium term given the high local mobile penetration and propensity for online shopping”, added Selena Ling.