Data in line with overall recovery; low-base effect also a factor: Analysts
THE all-important services industry, which makes up two-thirds of Singapore's economy, is the latest sector to record a return to robust growth.
Business has been particularly strong among firms here involved in financial and insurance services, education, and information and communications.
This helped to drive the business receipts index, released yesterday, 8.8 per cent higher in the first quarter, compared to the same period last year.
By contrast, in the first three months of last year, business receipts - income from business operations - of these firms had slid 2.3 per cent from a year earlier.
The impressive rebound follows the lead of strong performances in manufacturing and exports, as well as overall economic growth.
Economists The Straits Times spoke to said the growth is in line with the overall economic recovery. 'It is on par with the healthy growth of the economy as well as the turnaround in global trade which trickles down to services,' said United Overseas Bank economist Chow Penn Nee.
Another economist, Ms Selena Ling of OCBC Bank, said another contributing factor was the so-called low-base effect, as the comparative figure last year was recorded at the height of the global financial crisis.
The healthy year-on-year growth was not matched by the quarter-on-quarter figure, which grew only 0.1 per cent.
Many clusters in the services sector also saw quarter-on-quarter results not matching the stellar year-on-year ones.
For example, financial and insurance services, which led the sector's rebound with 17 per cent year-on-year growth, fell 1.1 per cent from the fourth quarter.
Business services, comprising legal, accounting and management consultancy services, for example, fared similarly.
While they grew 5.8 per cent in the first quarter year-on-year, business receipts dropped 1.5 per cent quarter-on-quarter.
Education, however, rose 15.4 per cent year-on-year - the sector's second best showing - and gained a hefty 24.3 per cent quarter-on-quarter. Infocomms services continued to do well, growing 11.5 per cent from a year earlier and 2.3 per cent quarter-on-quarter.
The mainly flat quarter-on-quarter business receipts do not necessarily flag a slowdown, said Ms Chow. 'It could be that in the previous quarter, there was already some growth, so the comparison base is larger, leading to a smaller headline number in the first quarter.'
Her sentiments are shared by Ms Ling, who says the sector could grow further in the coming quarters as wages rise.
Still, compared to the manufacturing sector's first quarter showing, growth for the services sector was relatively muted.
Ms Ling said this was 'possibly because the services sectors are more oriented towards domestic demand, and education services, infocomms are more like necessities.'
Ms Chow remains upbeat on the sector's outlook. 'In general, services should continue to grow in tandem with the broad recovery of the local economy.
'The recovery in global trade should also lift the services sector here. Coupled with the low-base effect from last year, high year-on-year growth numbers are set to continue.'
The quarterly index is compiled by the Department of Statistics. It does not include firms in wholesale and retail trade, hotels and restaurants.
Source: Straits Times, 28 May 2010