Retail sector projects subdued 1% expansion in 2026: analysts

Modest consumption and global uncertainty will cause Singapore's retail sales to flatten.

The retail sector is projected to see a subdued expansion of 1% in 2026, on expectations of modest consumption growth next year.

“With a moderate economic growth outlook, we forecast retail sales growth to flatten to around 1% y/y [year-on-year], with spending becoming increasingly reliant on SG60 vouchers to bolster non-discretionary spending,” DBS Group Research said in its latest report.

UnaFinancial also said in an analysis that 69% of consumers are the least likely to raise year-end spending in 2025.

“The spending landscape this year in 2025 was a tale of two halves: A notable downturn in spending was seen in early second quarter 2025 due to trade tariff anxieties, which was followed by a moderation in consumer spending during the second half, primarily in essential goods, influenced by government handouts,” the report read.

In the first half of 2025, DBS said recession concerns sent shockwaves through consumer sentiment. This prompted a defensive posture in anticipation of ‘the worst to come’ as global trade war fears escalated.

For the first nine months of the year, retail sales value totalled $37.5b, increasing 3.0% from last year and outperforming core inflation, which the Monetary Authority of Singapore expects to average around 0.5% to 1.0% for the full year.

Domestic spending was hindered by lower consumer confidence due to the tariff war and macroeconomic risks in the early part of the year. This period saw up to 5% decline in ex-motor retail spending from April to June.

By the third quarter (Q3), the sector saw a V-shaped recovery, bolstered by the SG60 voucher scheme.

Essential and heartland retail categories also experienced a significant boost from July, with supermarket and hypermarket sales leading the sector, increasing 10% to 11% from last year. Total retail sales for Q3 rose 5%, compared to 2% from last year. This shows that spending was back-end loaded into the year.

“With household budgets still constrained by high living costs and global uncertainty, the voucher scheme is anticipated to provide a meaningful tailwind for everyday spending through the remainder of 2025 and into 2026,” DBS said.

Essential categories, particularly supermarkets, should remain resilient, where a 6% growth is expected, DBS said.

“Meanwhile, F&B is likely to stagnate, as voucher-driven downtrading weighs on restaurant receipts. The key swing factor lies in tourist retail spending, where we identify a potential upside of 4%-5% y/y, driven by a further recovery in arrivals, to benefit central malls and luxury segments,” the report read.