Singaporean retail sales contract further in December, likely to fall in 2020 as well

Singaporean retail sales dropped in the month of December. On a year-on-year basis, the retail sales fell 3.4 percent, while it dropped 1 percent sequentially. For the whole of 2019 retail sales contracted 2.8 percent year-on-year, shrinking for the second consecutive year. Consensus expectations were for the retail sales to have fallen 2.5 percent year-on-year and 0.2 percent sequentially in December.

Stripping motor vehicles, retail sales grew 0.1 percent year-on-year and it fell 1.4 percent sequentially after two months of contraction, but this might not last. Moreover, this data print marked the first back-to-back annual contraction in retail sales since the post-GFC period in 2009-2010. The domestic retail picture also mirrors that in Japan, Hong Kong and South Korea.

Motor vehicle sales mainly weighed in on the headline print, falling 24.1 percent year-on-year in December, bringing the 2019 auto sales to a contraction of 11 percent year-on-year. This would be the worst since 2015. Online sales, as of December 2019, accounted for around 6.8 percent of total retail sales and the shift from physical window-shopping to online e-commerce sales might grow under the current environment where people shun crowded places.

“We may not have seen the bottom yet for retail sales. Given the ongoing coronavirus outbreak, retail sentiments are likely to remain very sluggish into January. There is a risk of 1Q20 GDP growth contracting due to the spillover economic effects from the coronavirus outbreak as outlined in our report on the Curtain Raiser for Budget 2020. While we do not expect the 4Q19 GDP growth to deviate significantly from its flash estimate of 0.8 percent yoy (0.1 percent qoq saar), the key to watch is if the official 2020 GDP growth forecast is shaded lower from the current 0.5-2.5 percent yoy range. Our 2020 GDP growth forecast is 0-2 percent yoy with a bias to the downside”, said Selena Ling, Head of Treasury Research & Strategy, OCBC Bank.