Singapore’s service sector grew in 4Q, economists remain cautious

Compared with fourth quarter 2015, overall business receipts grew by 0.5 percent in the fourth quarter of 2016, as data from the Department of Statistics Singapore (Singstat) showed yesterday (27 Feb), but economists remained cautious in their outlook for the sector.

change business receipt_singstat

Table source: Singstat
Source: Singstat

Positive growth in turnover was reported by transport & storage services (5.9 percent), information & communications services (5.5 percent), financial & insurance services (3.9 percent), business services (3.9 percent) and health & social services (0.5 percent).

Chart 1 / source: Singstat
Chart 1 / source: Singstat

Performance was mixed among the services industries. Education services reported the largest growth of 7.1 percent. And health & social services and information & communications services rose 7.0 percent and 2.6 percent respectively.

Chart 2 / source: Singstat
Chart 2 / source: Singstat

On the other hand, the recreation & personal services and transport & storage services industries reported declines of 3.7 percent and 1.8 percent in turnover respectively.

Today Online reported, CIMB economist Song Seng Wun said: “The services sector growth continues to be slow and uneven with selective hiring by businesses, largely in areas including IT security, compliance, healthcare besides professional consultancies.”

“While households continue to be careful about spending in general, parents are willing to spend more on children’s education.”

“Broadly speaking, an uptick in regional and global growth fuelling the export of a larger range of products is key to Singapore’s overall gross domestic product growth,” Mr Song said.

The services sector accounts for about two-thirds of the country’s economy. While the manufacturing output rose 21.3 percent, led by the robust growth in the electronics and biomedical manufacturing clusters, the services sector expanded by 1 percent, fueled mainly by segments such as transportation and storage as well as information and communications.

Credit Suisse economist Michael Wan said, “The domestic side of the services sector continues to be weak and we have yet to see signs of corporate profits picking up and spilling over into hiring.”

“On the external front, though it has been strong in the last quarter of 2016, here on and ahead in the second half of the year, it could turn slow if China continues to be weak and if United States President Donald Trump is not able to push through the tax cuts and infrastructure spending,” Mr Wan said.

The turnover of the overall services industries, excluding wholesale & retail trade and accommodation & food services, rose 3.6 percent in fourth quarter 2016 over the previous quarter.

All services industries performed well, except for the education services and the recreation & personal services industries which reported declines in revenue of 1.7 percent and 1.1 percent respectively.

Table 1 / source: Singstat
Table 1 / source: Singstat