The services sector experiences slower growth, impacted by transportation and storage industry decline
Singapore’s services industries saw a slower growth of 3.9% year-on-year in Q2 2023, marking the fourth consecutive quarter of easing growth. This slowdown comes after a revised 7.7% growth in Q1, according to data from the Department of Statistics (Singstat).
On a quarterly, non-seasonally adjusted basis, business receipts rose 2.4% in Q2, reversing a contraction of 4.6% in the previous quarter. Singstat’s business receipts index excludes wholesale trade, retail trade, and accommodation and food services, which are tracked separately.
The slowdown in Q2 2023 is partly due to a higher base from the previous year when Singapore’s economy was opening up, benefiting the services sector from more in-person activities, as noted by economist Song Seng Wun.
While most services industries recorded growth both year-on-year and quarter-on-quarter, a few industries stood out for their declines. The transportation and storage industry faced a significant 16.8% year-on-year drop in receipts, contributing to the easing of overall services growth. Despite a pickup in real output for transport and storage in Q2 2023, the decline in revenue was attributed to lower freight rates as global supply chain bottlenecks eased.
Chua Han Teng, economist at DBS, explained that the decline in transportation and storage services was closely linked to the easing demand for goods, affecting shipping activities, even though air travel demand remained strong.
The administrative and support services industry was the only other sector to experience a year-on-year decline in Q2. Additionally, there were signs of normalisation in sectors such as information and communications, which had benefitted from pandemic-driven digitalisation, and professional services, which had seen strong demand during the post-pandemic reopening.
On a more positive note, the recreation and personal services sector saw the largest increase in receipts, up 19.6% year-on-year. This was driven by higher earnings in the gaming and attractions segments, which saw increased business activity in Q2. The finance and insurance, as well as the real estate sectors, also experienced double-digit growth, with real estate developers reporting higher turnover.
On a quarterly basis, the information and communications industry recorded the largest increase in receipts, followed by professional services, which benefited from higher sales in legal, accounting, and business consultancy activities. In contrast, the education sector saw a drop in turnover, mainly due to lower fees received by higher education institutions.
Overall, while the services sector continues to grow, the pace has slowed due to challenges in specific industries, particularly transportation and storage. However, sectors like recreation, finance, and real estate show signs of strong performance despite the overall moderation in growth.
