The value of wholesale trade - a major component of Singapore's service sector - shrank in the second quarter from a year earlier as falling prices eclipsed a pickup in sales volume.
Domestic wholesalers reported an 18.8 per cent slide, weighed down by lower prices of petroleum and chemical products, the Department of Statistics said yesterday.
But, after adjusting for the drastic price changes over the past year, domestic wholesale trade grew 7.6 per cent year on year.
Foreign wholesale trade - a larger category that includes re-exports, offshore trade and transhipment cargo - fell 14.6 per cent in the second quarter.
Stripping out price changes, foreign wholesale trade rose 6.6 per cent from a year earlier.
"Replacement demand helped the electronics wholesalers, but overall trade was dragged down by (wholesalers in) petroleum, chemicals and shipping, which were affected by lower investments due to lower oil prices," said Standard Chartered economist Jeff Ng.
The weaker data also reflects the cautionary mood of firms here. Singapore's economy contracted 4 per cent in the second quarter, the Ministry of Trade and Industry said last week.
Another quarter-on-quarter contraction would put the Republic in a technical recession.
"We're hearing of more firms moving to just-in-time inventories, so they hoard up more cash," said Mr Victor Tay, chief operating officer of the Singapore Business Federation.
"Cutting down inventories is the right thing to do, especially when there's talk of bank lending rates getting higher once the (United States) hikes rates."
Exits from the big boys can also help to account for the weaker domestic wholesale trade in the second quarter.
In May, Toshiba told retailers here that it would stop selling some products in the local market. In June, chemicals giant Teijin Polycarbonate Singapore withdrew from Jurong Island.
Wholesalers are also receiving fewer orders from local retailers, manufacturers and other wholesalers as many companies here simply do not see growth opportunities amid an uncertain global outlook, while smaller firms struggle to withstand the slowdown, said Mr Tay.