SINGAPORE – Takings at the till rebounded in February, boosted partly by a lower base in 2022, with analysts sounding a cautiously optimistic note on tourism’s recovery.

Retail sales rose 12.7 per cent year on year. This was better than the 0.8 per cent decline in January – the first drop in nearly a year – as consumers purchased big-ticket items such as cars, furniture and household equipment ahead of the higher goods and services tax that kicked in on Jan 1, 2023.

Excluding motor vehicles, February’s retail sales rose 11.7 per cent, picking up pace from a 2.1 per cent increase in January, according to figures released by the Department of Statistics on Wednesday.

The latest figures were supported by the low base in 2022, as some shops were not open during the Chinese New Year public holiday that year, which fell on Feb 1 and 2.

UOB senior economist Alvin Liew said these celebrations were more subdued then due to Covid-19 restrictions, adding that retail sales were also boosted by tourism’s recovery.

There was higher spending during the 2023 festive season, which stretched into February, he added.

Retail sales rose 4.9 per cent in January and February compared with the same period in 2022.

OCBC Bank chief economist Selena Ling noted that the domestic labour market remains resilient and latest S&P Global data showed an expansion in Singapore’s private sector business activity.

“There should be ongoing support underpinning the retail sector despite the tepid performance of the manufacturing sector due to the global demand slowdown,” she said.

Month on month, February’s overall takings rose 3.9 per cent from January on a seasonally adjusted basis. This compares with a 9.5 per cent decline from December to January.

Retail sales grew year on year in February in all but one category – supermarkets and hypermarkets, which dipped 3.6 per cent. Food and alcohol saw the largest increase of 69 per cent, mainly due to higher demand for alcoholic products such as those sold in duty-free shops.

Sales of apparel and footwear, computer and telecommunications equipment, optical goods and books, and at department stores grew between 21.2 per cent and 38.1 per cent.

Overall, the estimated total retail sales value in February was $3.6 billion, of which online sales made up 12.4 per cent, higher than the 11.4 per cent recorded in January.

Mr Liew noted that despite the strong headline growth, the retail sales value was well off the $4.2 billion seen in January and $4.7 billion in December.

Inflation pressures are still elevated and, along with rising global oil prices and the GST hike, may increasingly curb households’ discretionary spending, he said.

“The low base effect is also likely to fade going into the new year, rendering less uplift,” added Mr Liew.

Meanwhile, takings of food and beverage services also grew, albeit at a slightly slower pace. They rose 21.6 per cent year on year in February, following a 21.9 per cent increase in January.

All industries in the food and beverage sector recorded growth in sales, with food caterers seeing the largest increase of 101.5 per cent amid higher demand for event and in-flight catering. Turnover at fast-food outlets, restaurants, cafes, foodcourts and other eating places rose between 8.9 per cent and 20.4 per cent.

Ms Ling said the uptick in visitor arrivals, especially with the return of Chinese tourists, should bode well for the service sector and particularly for the retail industry.

“That said, retail sales saw double-digit growth last year and should moderate to around 3 to 4 per cent year on year this year. STB (the Singapore Tourism Board) also only expects visitor arrivals to recover to pre-pandemic levels by 2024,” she added.

UOB’s Mr Liew noted that the full impact of China’s border reopening is not immediately visible due to limited and expensive flights, and extended waiting times for passport renewals, which have deterred travel outside of China.

But he added: “We still expect to see significant influx of Chinese tourists and their related spending in the subsequent months. As such, we maintain our 2023 retail sales growth forecast at 5 per cent.”