Bank loans fell for a ninth straight month in June as the sluggish economy continued to weigh on sentiment. Overall, loans slipped to $590.5 billion in June, down 2.7 per cent compared with the same month last year, due largely to a decline in business lending.

Bank loans last suffered a similar extended decline in the 1980s, when total lending shrank for 12 months in a row, from May 1986 to April 1987.

Business loans fell 6.2 per cent year on year in June to reach $345.1 billion, the 10th straight month of decline, according to preliminary data released yesterday by the Monetary Authority of Singapore.

The sharpest drop was in the general commerce sector, with loans plunging 24.7 per cent year on year to $56.4 billion.

Loans to financial institutions and manufacturers also experienced significant declines, as did lending to firms in business services.

However, loans to construction industry firms as well as to companies in the transport, storage and communications sector grew. Lending to agriculture, mining and quarrying firms also ticked up.

Meanwhile, consumer loans went up despite the gloomy economic outlook, supported by an increase in mortgages, credit card interest payments and share financing.

Overall, consumer loans rose to $245.3 billion in June, up 2.8 per cent from the same month last year.

Housing and bridging loans increased 3.8 per cent year on year to reach $187.2 billion, while credit card interest payments grew 4.8 per cent to $10.2 billion.

Share financing chalked up the biggest jump, more than doubling year on year to $2.4 billion.

However, car loans slid 3.7 per cent to $7.8 billion.

OCBC economist Selena Ling said the business outlook for the second half of the year remains cloudy - a recent survey revealed that manufacturers in the chemicals and transport engineering sectors are the least optimistic.