SINGAPORE (July 3): Singapore’s total retail sales value deepened its plummet by 52.1% year-on-year in May, due to the ‘circuit breaker’ measures which restricted the operations of non-essential services throughout the month.
This is a deterioration from the 40.5% contraction registered in April, data released by the Department of Statistics (Singstat) on Friday revealed.
It follows the tighter circuit breaker measures imposed, softer labour market and dampened consumer appetite, observes OCBC Bank’s Selena Ling who heads its treasury and strategy research arm.
May’s data also marks the metric’s largest decline since its adoption in 1986.
Consumer sectors took the greatest hit, with takings for watches and jewellery (-96.9%), department stores (-93.4%), wearing apparel and footwear (-89.1%), optical goods and books (-81.9%) and recreational goods (-74.2%) registering significant declines.
Other industries that registered contractions in May include furniture and household equipment (-64.2%), petrol station services (-58.2%), cosmetics, toiletries and medical goods (-49.0%) and computer and telecommunications equipment (-21.3%).
This comes from a combination of the closure of physical stores and households tightening their purse strings on the back of a weaker economic outlook.
The sale of food and beverage services which dipped 50.1%, showed a similar trend. This is a gentle easing from the -52.7% registered in April, and comes as these establishments stepped up their takeaway or delivery options.
Meanwhile, motor vehicle sales deepened to an 85.7% decline, as the certificate of entitlement (COE) exercise was suspended. Typically, there are two bidding exercises in a month. Sales were also affected from the closure of motor vehicle dealerships and showrooms.
As such, excluding motor vehicles, the retail sales index was down 45.2%, Singstat notes.
On a seasonally adjusted month-on-month basis, the index dipped 21.5%, but eased to 20.1% including motor vehicle sales. Of this, 24.5% came from online sales, Singstat shares.
Interestingly, the highest share of online sales came from computer and telecommunications equipment which came in at 94.3%. This comes as people sourced for IT gadgets as they worked from home and their children begun home-based learning.
Furniture and household equipment logged the next highest digital sales of 93.6%, as consumers became self sufficient as they stayed home.
The supermarkets and hypermarkets segment was the only one to buck the downward trend, as it rose 56.1% from the high demand for groceries as people stayed home.
However, this increase was not extended to other food services such as restaurants and caterers which saw takings of -68.7% and -45.1% respectively.
Collectively, this saw the value of food and beverage services plunging 50.1% to $430 million. Of this, amount 44.6% came from online sales as more consumers turned to mobile apps to purchase groceries and cooked food. Such platforms enabled the segment to increase 4.1% month-on-month.
Looking ahead, OCBC’s Ling says the Phase 1 and 2 measures imposed in June could bring an improvement in retail sales. “We expect some improvement with a potential initial snapback in pent-up demand,” she observes.
However, “the test of the pudding is whether the momentum can sustain into 2H20, especially since the domestic labour market conditions remain soft and there has been an emergence of second wave of Covid-19 infections globally,” she points out.
The hesitation to restart international travel could see demand conditions remaining muted in the coming months, adds Ling.
Senior Economist, Asia at ING Bank, Prakash Sakpal shares similar sentiments. Drawing reference to April – May’s average sales growth of -46%, he “doesn’t think June['s] growth [will] drift far off from this rate.
“The reopening of the economy should have provided some relief to spending in June, though we don’t think all pent-up demand has returned just yet given continued caution on the pandemic,” he stresses.
“We expect consumer demand to continue to lack vigour throughout the rest of the year, and well beyond, as persistent economic strain and rising job losses are likely to deter non-essential spending".
For now, OCBC's Ling is looking at a milder 10.5% year-on-year contraction in June, before it possibly edges up into positive terrain in 4Q20. For the full year, she’s expecting a 9.5% year-on-year dip.
