Why retail sales growth slowed in August

Retail sales only grew by 0.6% YoY.

Three factors may have contributed to the slowdown in retail sales, according to analysts.

In a report, RHB experts said slower retail sales growth in August could be attributed to a decline in tourism expenditure per capita, a shift towards online purchases, and frontloading behaviour by consumers due to the GST hike.

The experts explained that declining tourism expenditure per capita in Singapore may have dragged down retail sales.

"This similar scenario has been observed in Thailand, the biggest tourism hub in Southeast Asia, where slower tourism income per foreign visitor is evident despite high arrival numbers," the experts said.

"Assuming similar spending behaviour, the decline in tourism expenditure per capita may affect retail sales despite improving tourist arrivals," they added.

Consumers' preference for online shopping also negatively impacts retail sales in Singapore, according to the experts.

In September, online retail sales accounted for 49.3% of computer & telecommunications equipment sales, 33.7% for furniture & household equipment, and 12.9% for supermarkets & hypermarkets.

The increase suggests that "consumers shop online from abroad rather than coming to Singapore," said the RHB analysts.

"This shift in spending could lead to lower foot traffic and decreased sales for small retailers who rely heavily on local consumers," they added.

Lastly, RHB noted that customers' frontloading behaviour due to the GST hike earlier this year could also weaken retail sales growth.

"Retail sales increased before the GST hikes in 2007 and 2023, likely due to frontloading, where consumers purchased items before the tax increase," RHB said.

"We believe the minimal impact on 2024 sales may be due to consumers adjusting their expectations after the GST rate increase was announced in 2022, allowing most frontloading behaviour to occur then," the analysts added.

Nevertheless, RHB still expects retail sales growth to improve in the coming months, projecting a 2.0% increase in 2024.

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