Retail sales down 18.3% in September

Retail sales are expected to stay weak in the near term as local social incidents continue.

The value of total retail sales decreased 18.3% YoY to $29.9b in September compared to the same month a year earlier, according to provisional estimates of the Census and Statistics Department (C&SD).

For the third quarter as a whole, retail sales volumes fell by 19.5% YoY, which was almost on par with the record decline in the third quarter of 1998, a government spokesperson commented.

Also read: August retail sales plunge in worst performance on record since 1998

“Local social incidents” was identified as the main driver of the significant declines in retail sales as these “continued to take a heavy toll on inbound tourism and consumption-related activities,” according to the spokesperson.

For the first nine months of 2019, C&SD estimated that the value of total retail sales decreased by 7.3% YoY compared with the same period in 2018.

After netting out the effect of price changes over the same period, the volume of total retail sales in September 2019 crashed 20.4% YoY compared to a year earlier, whilst total retail sales for the first nine months of 2019 decreased by 8.3% YoY compared to the same period last year..

The value of sales from jewellery, watches and clocks recorded the biggest value decline at 40.8% YoY in September. The value of sales of wearing apparel, department stores, and medicines and cosmetics, also dropped 26.3% YoY, 25.6% YoY, and 21.7% YoY, respectively.

Analysed by broad type of retail outlet in descending order of the provisional estimate of the value of sales and comparing September 2019 with September 2018, the value of sales of commodities in supermarkets decreased by 2.6%.

These were followed by sales of supermarkets (-2.6% YoY); sales of food, alcoholic drinks and tobacco (-13.8% YoY); electrical goods and other consumer durable goods, not elsewhere classified (-1.4% YoY); motor vehicles and parts (-16.1% YoY); furniture and fixtures (-7.2% YoY); books, newspapers, stationery and gifts (-9.6% YoY); footwear, allied products and other clothing accessories (-16.6% YoY); Chinese drugs and herbs (-18.2% YoY); and optical shops (-15.8% YoY).

On the other hand, the value of sales of fuels rose 5.9% YoY in September compared to a year earlier.

Retail sales are expected to stay weak in the near term. “As protests involving violence continue to deter tourists and reduce local consumption, and the subdued economic outlook also dampens consumer sentiment, the performance of retail sales is likely to stay weak in the near term,” the spokesperson said.

Bank of America Merrill Lynch (BofAML) economists Miao Ouyang and Helen Qiao shared a similar view. “Looking ahead, retail sales will likely continue to see a significant drop as both tourist and local spending stay weak. Despite government subsidies to support the tourism sector, weak tourist arrivals may not turn around any time soon. In September, inbound tourist arrivals declined by 34.2% YoY after plummeting 39.1% in August. The Golden Week holiday in October has already recorded a more than 50% drop in mainland tourist arrivals, and Christmas will likely become another peak-season miss for local retailers,” they commented in a report.

“In addition, continued social instability also impaired consumer confidence and deterred spending by local residents, especially on durable goods,” they added.

Whilst the recent reduction of retail rents could ease some pain from retailers, BofAML expressed concerns about the rising unemployment rate in the retail sector, noting that the government may roll out more policies to temporarily support the market.

Photo courtesy of Wikimedia Commons.