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Singapore: positive prospects for retail sales in 2020 – UOB

Economist Barnabas Gan at UOB Group gives his opinion on the recent performance of the retail sector in Singapore.

Key Quotes

“Singapore’s retail sales continued to contract for a tenth straight month, albeit slightly better than market estimates at -4.0% y/y (+0.2% m/m sa) in November 2019… Accounting for the latest data, Singapore’s retail sales fell 2.8% year-to-date.”

“The fall in retail sales in November was seen despite the many online shopping events, which included Singles’ Day (11 November) and Black Friday (29 November).”

“Rather than concluding that consumer demand softened in November, we opine that much of the demand had been concentrated in the online shopping environment. This benefited cross-border retailers rather than domestic retailers, especially seen during Singles’ Day and Black Friday, which reportedly profited retailers in China, Hong Kong, United States and Malaysia.”

We continue to hold the view that retail sales is likely to improve into 2020. We identify that several key factors had contributed to the slowdown in retail sales, which include (1) the rising popularity of online shopping which had benefited cross-border retailers, (2) slower demand for motor vehicles which corresponded with the lower COE quota for the period of November 2019 to January 2020, and (3) the absence of Cyber Monday in November (which fell on 3rd December 2019 instead). However, the return of big ticket buying especially in watches & jewellery and telecommunication & computers suggest that consumer confidence is picking up as global economic conditions improve to-date. As such, with Singapore’s economic growth estimated to recover to 1.5% in 2020 (up from our estimate of 0.5% in 2019), the improvement in risk appetite and a rosier economic environment should provide the necessary fillip for retail sales for the year ahead.”

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