Retail rebound may fade as labour and trade headwinds emerge

RHB and UOB attributed the improvement to a rebound in tourism and targeted government support measures.

A sharp rebound in Singapore’s retail sales in August has raised hopes for a stronger second half of the year—but analysts warn that the recovery may lose steam as labour market conditions soften and external demand weakens.

Both RHB and UOB flagged growing risks to consumer sentiment in research notes released on  3 October. RHB cited potential labour market softening and trade-related uncertainties as key headwinds heading into late 2025.

UOB echoed those concerns, pointing to a decline in the Ministry of Manpower’s Net Employment Outlook and cautioning that high-profile events like the F1 Grand Prix and concerts may not be enough to offset broader economic drag.

Despite the caution, recent data showed a solid pickup in consumer activity. Retail sales rose 5.2% YoY in August—the strongest growth since February 2024. On a month-on-month seasonally adjusted basis, sales climbed 0.5%, following a revised 3.9% surge in July.

Both banks attributed the improvement to a rebound in tourism and targeted government support measures.

RHB maintained its 2025 retail sales growth forecast at 2.5%, expecting further strength in the fourth quarter, driven by increased visitor arrivals during China’s Golden Week and the year-end holiday season, as well as the continued impact of SG60 and GST vouchers.

UOB noted that July–August visitor arrivals reached about 93% of 2019 levels, with Chinese arrivals exceeding pre-pandemic figures. Domestic spending was also supported by lower outbound travel due to the school term and SG60 payouts of up to $800 per household.

Categories that saw strong momentum in August included furniture and household goods, recreational items, cosmetics, and apparel.

Watches and jewellery also posted notable gains. In contrast, department stores and mini-marts registered year-on-year declines, and the computers and telecoms segment saw slower growth.

Whilst both RHB and UOB acknowledged firm near-term drivers—tourism and cash disbursements—they stressed that downside risks could weigh on discretionary spending as the year progresses.