SINGAPORE'S retail sales fell in October, more evidence the city-state's economy likely contracted for a third straight quarter as dwindling consumer demand adds to drops in manufacturing and exports.

Retail sales fell a seasonally adjusted 2.1 per cent in October from the previous month and decreased 3.6 per cent from the same month a year earlier, the statistics department said in a statement Monday.

Earlier on Monday, the manpower ministry said the unemployment rate was steady in the third quarter at 2.2 per cent, but the economy added just 55,700 jobs, less than in the previous quarter and the third quarter last year.

'The labour market is starting to soften and that will impact consumer spending,' said Irvin Seah, an economist with DBS bank in Singapore. 'We expect retail sales numbers to continue to slide.'

Gross domestic product began contracting in the second quarter as demand dried up from the US and Europe for Singaporean electronics and pharmaceuticals. Non-oil exports, which account for about 70 per cent of GDP, fell 15 per cent in October from a year earlier and industrial production dropped 13 per cent.

The government said last month the economy fell into recession in the third quarter, shrinking 6.8 per cent from the previous quarter after contracting 5.3 per cent in the second quarter.

The government expects 2.5 per cent growth this year and economic activity next year to range between a 1 per cent contraction and 2 per cent growth.

The unemployment rate will likely rise to 2.5 per cent in the fourth quarter and 3.6 per cent at the end of next year, Seah said.

'Things will get even worse before they get better,' Mr Seah said.

'The first quarter will be the worst for economic growth.' -- AP