Singapore’s retail sales increased 1.1% y/y in Jul, lower than Bloomberg’s consensus of 2.1% y/y but a tad higher than Jun’s revised reading of 1.0% y/y. On a seasonally-adjusted sequential basis, retail sales rose 0.6% m/m in Jul, reversing the two preceding months of sequential contraction (Jun: -0.8% m/m, May: -0.1% m/m). Excluding motor vehicle sales, retail sales fell by 1.1% m/m (Jun: 0.1% m/m), translating to a milder y/y print of 0.4% (Jun: 2.3% y/y). In nominal terms, the value of retail sales rose to S$3.94bn (from S$3.84bn in Jun). 

Outlook – We continue to expect retailers to enjoy some level of domestic and external support, complemented by major events such as various sports, popular concerts and BTMICE (Business Travel and Meetings, Incentive Travel, Conventions and Exhibitions) activities.

Downside risks to retail sales in 2H23 include a more cautionary external environment, easing in labour market conditions (slowing wage growth; uptick in unemployment and underemployment rates; weaker hiring sentiment across sectors) and a slower than expected return of inbound Chinese tourists. Given the recent softening in retail sales prints and elevated prices (especially on food and transport) which increasingly weigh on household spending, we downgrade our 2023 retail sales growth forecast to 3.5% from 5.0%.