Singapore’s retail sales rose 1.4% y-o-y in May, the fastest annual increase since January, lifted by a sharp rebound in motor vehicle sales. However, underlying momentum in the sector remains weak, and retail activity is expected to slow in the second half of 2025, according to RHB Bank Singapore.
In a note issued on Jul 5, RHB economists cautioned that retail sales excluding motor vehicles were flat y-o-y in May, compared to 0.8% growth in April. This indicates a slowdown of sales momentum and suggests that further softening in the retail sector may be expected in the coming months.
“The rebound was primarily driven by a strong recovery in the motor vehicles segment, which posted a 10.4% y-o-y increase, reversing the 2.9% y-o-y decline recorded in April,” wrote Barnabas Gan, RHB’s group chief economist & head of market research, and Laalitha Raveenthar, associate research analyst at RHB. “International events such as Lady Gaga’s concert and the distribution of CDC Vouchers in May likely provided an additional boost to retail activity,” say Gan and Raveenthar.
Retail sales rose 1.0% on a seasonally adjusted m-o-m basis. Ytd, sales are up 1.0%. However, more than half of the 14 retail trade categories recorded declines in May, indicating broad-based weakness beneath the headline numbers.
Notable y-o-y gains were seen in supermarkets and hypermarkets (+7.2%), recreational goods (+7.0%), optical goods & books (+4.5%), and cosmetics & toiletries (+2.0%). However, key segments such as watches & jewellery (-2.1%), food & alcohol (-4.5%), apparel (-5.3%), and department stores (-3.9%) continued to contract.
Gan and Raveenthar remain cautious on the retail outlook. “We anticipate retail to soften in 2H2025,” they wrote. The analysts highlighted three key factors behind their view: an expected economic slowdown; weakening labour market conditions; and sluggish tourist arrivals.
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Singapore’s economic momentum is projected to slow in the coming quarters amid continued global uncertainty. “We foresee downside risks to Singapore’s retail sales in the upcoming months as both businesses and households adopt a more cautious, wait-and-see stance and postpone spending decisions,” say the analysts.
They warned that the expiration of a 90-day pause on tariff measures, due Jul 8, could exacerbate trade tensions and weigh on regional growth. “Weakening external demand driven by the broader impact of tariffs on global trade is likely to weigh on Singapore’s exports and overall economic performance,” they say, adding that this could further reduce discretionary spending by households.
The domestic labour market is also showing signs of cooling. While job vacancies rose in March across most sectors, the manufacturing sector has started to exhibit slower manpower demand. “The rise in both job vacancy and unemployment rates signals a softening in labour demand amid ongoing economic uncertainty,” say Gan and Raveenthar. As hiring slows and wage growth moderates, household spending may come under pressure.
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Tourist arrivals remain below expectations, adding further drag to the retail sector. As of May, year-to-date tourist arrivals grew only 2.3%. The Singapore dollar has continued to appreciate, gaining 5.44% against a trade-weighted basket year-to-date. The strength of the SGD makes Singapore relatively more expensive for visitors and could be discouraging inbound travel.
“The Singapore dollar’s relative strength against other Asian currencies may encourage residents to spend more overseas, thereby dampening domestic retail performance,” the analysts note.
Despite the temporary lift from one-off events and vehicle-related purchases, RHB believes the outlook for retail remains subdued. Gan and Raveenthar note that without new policy support or a sharp rebound in regional tourism, Singapore’s retail sector is likely to remain under pressure for the remainder of the year.
