GDP upgrade, CDC vouchers support retail sales outlook

UOB said global risks may weigh on discretionary spending.

Singapore’s retail sales growth is expected to remain positive through 2026, supported by stronger economic growth and policy measures, UOB said.

The report said earlier worries that elevated energy prices and transport costs could weigh heavily on consumer sentiment and discretionary spending have eased, amidst expectations of reduced intensity in the Middle East conflict and a gradual recovery of energy flows through the Strait of Hormuz.

Domestic consumption is also expected to receive support from government initiatives, including the latest tranche of Community Development Council (CDC) vouchers, which are likely to benefit supermarkets, heartland retailers, and food and beverage operators.

The bank noted that its recent upward revision of Singapore’s 2026 GDP growth forecast to 4%, from 3.2% previously, reflects stronger economic prospects and should provide further support to domestic demand.

However, external uncertainties are expected to keep consumers cautious, particularly on non-essential purchases.

Singapore’s retail sales declined 2.3% month-on-month on a seasonally adjusted basis in May, reversing April’s 0.4% increase.

UOB attributed the pullback to more cautious consumer spending, particularly on higher-priced items.

Nine of the 14 retail categories recorded sequential declines in May. The largest declines were seen in wearing apparel and footwear, which fell 4.9% month-on-month after rising 3.0% in April, followed by motor vehicles (-4.8%), food and alcohol sales (-4.6%), watches and jewellery (-4.3%), mini-marts and convenience stores (-3.7%), and supermarkets and hypermarkets (-2.9%).

Still, several segments posted gains. Sales of recreational goods surged 11.6% month-on-month in May, following a 3.1% increase in April, ahead of the school holiday period.

Furniture and household equipment sales rose 3.2%, whilst optical goods and books increased 1.3%. Computer and telecommunications equipment also edged up 0.8% after declining in April.

On a year-on-year basis, retail sales continued to expand, growing 3.0% in May, although this was slower than April’s 5.4% growth and March’s 4.6% increase.

Excluding motor vehicle sales, retail sales rose 3.7% year-on-year, compared with 4.5% growth in April.

In an earlier report released in May, RHB also projected that Singapore’s retail sector would remain resilient in the near term, supported by resilient domestic demand, a firm labour market, and government support measures.

However, the bank cautioned that growth could moderate in the second half of 2026 as global economic headwinds and geopolitical uncertainty in the Middle East weigh on consumer spending and business investment.

It also warned that higher fuel costs linked to the conflict could add to inflationary pressures and pose downside risks to retail sales.