Retail sales surged in November with their strongest growth in almost two years, reversing course from the slump seen in October possibly due to the launch of the iPhone X and improved consumer sentiment, say economists.
Total takings grew 5.3 per cent in November compared to the same month a year ago – its best showing since March 2016, according to latest data by the Singapore Department of Statistics.
This is a reversal of the 0.2 per cent decline recorded in October – revised lower from earlier estimates of a 0.1 per cent dip – and a steeper 0.6 per cent fall in September. It also beat economist forecasts of a modest 1.1 per cent rise, according to a poll by Bloomberg.
Despite the volatility usually seen in retail sales numbers, economists say that November’s data is a sign of a continued pickup in sentiment thanks to a brightening economy.
Maybank Kim Eng economist Chua Hak Bin said: “You haven’t seen this type of retail numbers for quite some time. It looks as if growth has broadened and consumers are a lot more upbeat… Generally, the feel-good factor has spread out.”
While it seems that consumer spending has finally turned the corner, one factor that could influence this recovery is a hike in taxes. Credit Suisse economist Michael Wan said: “The one risk is on policy – whether the government will change any tax rates and the magnitude of change.”
Goods and services tax (GST), which has stood at 7 per cent since 2007, is widely seen as the top contender for a hike, with e-commerce tax another likely candidate. Market watchers expect the issue of tax to be addressed at the upcoming Budget 2018.
Maybank’s Mr Chua said that the timing of a GST hike, if any, matters. For example, there could be an uptick in retail sales as consumers bring forward their spending ahead of higher taxes in the future. A possible e-commerce tax could also affect retail sales. Mr Chua explained: “Some of the international e-commerce transactions are not captured (in terms of tax). There could be some shifts as the playing field is levelled as this (an e-commerce tax) will take away some advantage that the international online players have.”
As of now, retail sales data mostly captures brick-and-mortar spending. He believes November’s stellar growth was likely driven by smartphone sales with the launch of the latest iPhone X, which would explain the surge in computer & telecommunications equipment sales.
Computers & telecommunications equipment was by far the best performing segment, going up by 16.6 per cent compared to a year ago. This was followed by supermarket sales at 9.7 per cent and petrol service station sales at 9.6 per cent.
On a month-on-month basis, the performance of computers & telecommunications equipment was even more stark, jumping 46.5 per cent compared to October. This was followed by motor vehicles at 14.6 per cent. The poorest performing segment was watches & jewellery with a decline of 3.6 per cent.
After seasonal adjustment, total retail takings went up by 5.1 per cent in November compared to the month before. Excluding car sales, it still grew a respectable 2.9 per cent.
While retail sales was much stronger than expected, sales of food & beverage services was mixed. Total takings grew 2.1 per cent year-on-year, but dipped 0.1 per cent compared to October. The total retail sales value in November was estimated at S$3.8 billion, higher than the S$3.6 billion seen last year.
Despite the uncertainty surrounding possible tax hikes, economists remain optimistic on the outlook for retail sales in 2018.
Mr Chua pointed out that even when GST was increased in the past, the backdrop of a booming economy helped offset its dampening effects.
He said: “The state of the economy and the job market – those are always the more overwhelming factors. What’s important is that the economy holds up.”