Service sector's revenue growth slows to 2.8% in Q2

The business services industry registered a 2.9 per cent quarter on quarter increase in business receipts, with firms engaged in professional services reporting an increase in takings.
The business services industry registered a 2.9 per cent quarter on quarter increase in business receipts, with firms engaged in professional services reporting an increase in takings.PHOTO: ST FILE

Further weakening expected due to global headwinds, say analysts

Revenue growth in the service sector slowed again in the second quarter, with analysts warning of further weakening ahead.

Overall receipts rose 2.8 per cent in the three months to June 30, compared with the same period a year earlier, but fell short of the 3.6 per cent expansion in the first quarter and the 4.1 per cent increase in the fourth quarter last year.

All segments registered higher quarterly revenue year on year, with transport and storage posting a 5.6 per cent year-on-year increase.

This was due to higher demand for water and air transport services, according to data from the Statistics Department yesterday.

Turnover in health and social services rose 4.2 per cent on the back of higher receipts from hospitals.

DBS Bank senior economist Irvin Seah said the moderation in second-quarter takings reflects the spillover effects from headwinds affecting the global economy.

Maybank Kim Eng senior economist Chua Hak Bin noted that business services - which posted 0.1 per cent growth - and financial and insurance services - which grew 4 per cent - tend to be more sensitive to the economic cycle.

"Stricter property measures are also compounding the negative impact on business services, which capture real estate activities," Dr Chua said.

Mr Seah expects revenue growth to slow further, given continued weakness in the export sector.

Dr Chua added that the escalating trade tensions between the United States and China, and a weakening job market, would likely translate to lower business service receipts.

The education segment reported a 10.6 per cent decrease in revenue from the previous quarter.

Recreation and personal services also declined by 8.3 per cent.

Dr Chua noted that the significant decrease in takings for these two segments was likely due to seasonal factors.

Education fees are usually paid in the first quarter for local schools, and spending on recreation and personal services tends to be high from January to March, possibly due to the Chinese New Year holiday, he said.

On the other hand, turnover for transport and storage services rose 4.1 per cent from the first three months of the year, while business services registered a 2.9 per cent increase.

A version of this article appeared in the print edition of The Straits Times on August 28, 2019, with the headline 'Service sector's revenue growth slows to 2.8% in Q2'. Print Edition | Subscribe