If the latest snapshot of bank lending is anything to go by, economic headwinds are forcing businesses to start cutting spending and investment.

Loans fell 0.8 per cent last month from August to $608.3 billion, the first decline after five months of modest and slowing growth in bank lending.

Last month's drop was mainly caused by a 1.6 per cent fall in loans to businesses to $367.4 billion, said the Monetary Authority of Singapore yesterday.

"This is also the first monthly decline for business loans since April, which suggests that business confidence may have faltered slightly in the last six months," noted OCBC Bank's head of treasury research and strategy, Ms Selena Ling.

ANZ economist Ng Weiwen said the decline was probably due to a combination of businesses cutting back on credit and banks becoming more cautious about who they lend to. "Trade-related sectors, such as manufacturing and general commerce, were probably impacted by the ongoing trade recession which weighs on demand for trade finance loans," he added.

Loans to most business sectors, including agriculture and mining, manufacturing, general commerce and financial institutions, fell.

The building and construction sector was an exception, borrowing 0.4 per cent more last month than in August. "Public residential construction increased during the third quarter, and public sector construction also saw increased spending on MRT and road transport networks," Mr Ng said.

"Construction firms that were awarded these tenders were probably the key source of loan demand."

Loans to the business service sector also grew, rising a strong 6.2 per cent from August to September.

Lending to consumers rose 0.2 per cent to $240.9 billion.

The modest growth was mainly driven by a 1 per cent rise in credit cards and 3.8 per cent increase in share financing from August to September.

Housing and bridging loans were up 0.5 per cent but car loans continued to fall, down 0.6 per cent last month from August.

Ms Ling noted that bank loans grew a tepid 1.8 per cent in the first nine months of this year, compared with the same period last year.

This is a sharp slowdown from last year, when loans made from January to September were up 12.9 per cent from the same period the year before.

"Business loans grew at a lacklustre 0.4 per cent year-on-year for the nine months of this year, reinforcing the cautious business mood amid external and domestic headwinds," she noted.