Financial Services Sector

The Financial Services Sector edged up marginally from 2.4% in the first quarter to 2.6% in the second quarter. Improved performance in the commercial banks and stockbroking industry lent support to the sector. However, the insurance business, which surged following the further liberalisation of the CPF Investment Scheme slowed significantly.

Business Services Sector

The Business Services Sector slipped from 5.5% in the first quarter to 3.4% in the second quarter. The real estate services segment, which accounts for about 46% of the sector, remained weak in line with a sluggish property market. The professional services segment also reported slower growth, although IT services stayed healthy.

Labour Market

Total employment is estimated to have risen by only 5,000 in the second quarter, substantially lower than the 23,200 employment gain in the prior quarter. Employment growth in the services producing industries (12,500) partly offset the decline in the goods producing industries (-7,500). Preliminary estimates showed that around 5,600 workers were displaced in the second quarter, 72% higher than the 3,248 laid off in the previous quarter. This brings total retrenchment in the first half of the year to almost 9,000. As a result, the seasonally-adjusted unemployment rate edged up from 2.4% in the first quarter to 2.6% in the second quarter. Unemployment is likely to rise further in the months ahead as the full impact of the economic downturn filters into the labour market.

Labour Productivity

Labour productivity fell by 5.5% in the second quarter after turning marginally negative in the previous quarter. All major sectors, except construction, registered a decline in productivity. The downturn in the electronics industry led to a contraction of as much as 13% in manufacturing productivity. Labour productivity also fell by a greater extent in the business services (-7.6%), wholesale & retail trade (-5.5%), hotels & restaurants (-3.6%) and transport & communications (-2.2%). The financial services maintained the same productivity rate of -5.7%.

Business Costs

The unit labour cost (ULC) index rose sharply by 13% over the corresponding period last year on the back of the decline in productivity. The Unit Business Cost (UBC) index of the manufacturing sector increase by a greater 9.8% in the second quarter. All three components of the manufacturing UBC registered increases. The ULC for the manufacturing sector went up by a substantial 19%, following a 10% increase in the first quarter. This was due mainly to a 13% fall in manufacturing labour productivity. Services cost rose by 4.0%, as higher costs of transport, financial services and utilities outweighed cheaper warehousing and telecommunication costs. At the same time, government rates and fees rose 13% mainly due to a reduction in property tax rebate and increased import duties on tobacco products.

External Trade

Singapore’s external trade continued to weaken in the second quarter of 2001. Total trade contracted by 5.1% in the quarter, the first time in nine quarters. The decline was largely due to the continued downturn in global electronics demand, as well as the slowdown in the major economies such as the US, EU and Japan. Sluggish demand from the regional economies also took its toll on Singapore’s external trade. Similarly, trade in volume terms declined by 7.2% in the second quarter of 2001, down sharply from a growth of 6.1% in the previous quarter.

Investment Commitments

Balance of Payments

Consumer Price Inflation

The consumer price index (CPI) for the second quarter of 2001 fell marginally by 0.1 % over the previous quarter. The decline was attributed primarily to cheaper food and lower cost of housing. Compared to the same quarter a year ago, the CPI rose by 1.7 %. Except for the transport and communications group, all the other categories showed increases, ranging from 0.6 to 4.0 %.

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Press Release dated 10 Aug 2001