Stronger tourist arrivals fail to translate into stronger retail sales

CGS said the gap points to subdued spending among tourists and locals.

Singapore’s retail sales remained subdued despite a strong recovery in tourist arrivals, suggesting that both visitors and locals were spending cautiously, CGS International said.

Nominal retail sales fell 1.0% month-on-month (MoM) on a seasonally adjusted basis in August, reversing a 0.6% increase in July.

Average monthly retail sales in July and August were only 2.9% above second-quarter levels, even as tourist arrivals averaged about 29% higher over the same period amid the summer school holidays in China and Europe.

Tourism-sensitive segments weakened in August, with department store sales falling 1.5% MoM sa after rising 4.6% in July. Watches and jewellery sales declined 7.8% after a 2.6% increase in July.

Retail sales were also weaker in volume terms, falling 1.2% MoM sa in August after a 0.1% increase in July.

On a year-on-year basis, retail sales volume fell 2.7%, despite nominal retail sales increasing 0.7%.

CGS International said the nominal increase was largely attributable to price effects from higher input and energy costs following the escalation of the Middle East conflict in late February.

Softer labour market conditions are also weighing on consumer sentiment, according to CGS. As per its Labour Market Pressure Index, further increase in labour market slack in the second quarter of 2026, whilst retrenchments rose to 4,620 from 3,830 in the first quarter.

CGS said the increase in retrenchments likely prompted households to adopt a more cautious stance towards discretionary spending.

Motor vehicle sales also fell sharply, declining 9.5% MoM sa in August after rising 2.0% in July.

CGS International said the decline was significantly larger than implied by the modest decline in average COE premiums and COE quotas in August compared with July.

eToro Market Analyst Zavier Wong also pointed to high COE premiums as a factor behind the motor vehicle slump. COE premiums were near the July record of $129,000, whilst the August-to-October quota increased only 0.2% from the previous quarter.

“At that sort of price for just a certificate, I think buyers are waiting for a cheaper bidding round, and the delay is what's pulling the category down this month,” he said.

Wong also said higher oil prices and renewed concerns over Middle East tensions were affecting household spending behaviour, as consumers anticipated higher prices.

“That awareness alone changes spending behaviour, as people are anticipating prices to move and choose to cut now,” he said. “Cafes and food courts both posted sharp year-on-year declines, the two categories most tied to that kind of discretionary cutback.”

Some retail categories recovered in August. Cosmetics, toiletries and medical goods sales rose 8.4% m/m sa after falling 2.7% in July, whilst computer and telecommunications equipment increased 3.1% after a 5.0% decline. Food and alcohol sales also rose 3.4% following a 4.4% fall in July.