Retail recovery remains challenged, despite February increase

OCBC has forecast 2021 retail sales to increase 15% year-on-year, yet this is still below pre-pandemic levels.

Retail sales in February rose 30% to $29.5b after 24 consecutive months of decreases, but OCBC Treasury Research the sector’s performance may still be affected by the joblessness in Hong Kong, and the expected slow resumption of tourist activities.

Retail sales in February and in January, taken together, increased by 2.7%, according to the Census and Statistics Department (C&SD). Online retail sales in the first two months of the year rose 74.5% compared to 2020.

“Going forward, the retail sector’s performance may be divided,” OCBC said in a report.

The bank cited that retail outlets catering to local consumers did have an improving outlook, in light of the gradual easing of social distancing measures in the City.

The provision of e-consumption vouchers will also contribute to the sector’s improved performance; but it might also be negatively affected by the job situation in Hong Kong - with the unemployment rate rising to a new high at 7.2% between December 2020 and February 2021.

Moreover, the outlook for retail outlets the serve tourists, OCBC said, remains “bleak” due to the slow rollout of vaccines in Hong Kong and overseas, implying that border reopening will remain unlikely in the near term.

“In conclusion, we expect retail sales to grow around 15% YoY this year, which however will still be lower than the level of 2019,” OCBC said.

The government has so far administered more than 490,000 doses of COVID-19 vaccines, since it started the vaccination programme on 26 February.

A government spokesman had noted in the C&SD report that the sharp increase in the February sales reflects the difference in the timing of the Lunar New Year celebration in 2020 and 2021.

The spokesman likewise raised that the retail sector will face difficulty in the near term due to the tourism sector.

“It is thus pivotal to put the epidemic under control at the soonest possible, so as to create a favourable environment for the revival of cross-boundary tourism activities,” the spokesman said.