Singapore's retailers have seen sales of festive items drop ahead of the Chinese New Year, suggesting the gloomy economic scenario is denting Lunar New Year celebrations.

Slow sales is seen not just in gift and decorative items, but in the food segment as well, with some food retailers in Chinatwon reporting up to 20 percent dip in sales compared with the previous year.

"We suspect it's the economy, (it's) because of the retrenchments that are going around in the market," the owner of a family-run barbecue pork stall told Channel News Asia.

"A lot of people are browsing and tasting, but fewer are buying. I think it's due to the bad economic situation," said an employee of a fruit and nut supplier which has seen sales fall by 30 percent.

The downturn in Chinese economy and a stock market rout in the new year have spilled over to the region, hitting economic sentiment in Beijing's main trading partners like Singapore.

Sentiment drops

A survey conducted by the Economic Development Board (EDB) last week found that 29 percent of the more than 400 manufacturers polled between December and January thought the conditions will take a downturn in the next five months. Only seven percent think the conditions will improve while the rest see no change.

Meanwhile, a poll conducted by the Department of Statistics (DOS) showed businesses in Singapore's services sector have become increasingly pessimistic about short-term business prospects.

About 28 per cent of 1,500 services firms polled see business expectations to turn grim over the next six months. The DOS says almost all the services sector layers expect the level of business activity to decline in the six months.