Private consumption spending crashed to 2-year low in Q3

Restructuring efforts are yet to bear fruit.

Singapore’s private consumption expenditure slowed to a near 2-year low in the third quarter. On a quarter-on-quarter basis, it increased by the slowest sequential pace in 14 months, according to a report by HSBC.

HSBC noted that there is little reprieve on the horizon as the property sector continues to lose steam. Depressed property prices have a negative wealth effect, which can cause consumption to slow even further.

HSBC further warned that firms in the policy-battered services sector are likely to pass a bigger chunk of their growing costs to their consumers.

“In spite of the tight labour market conditions brought about by the economic restructuring, most services firms have not yet fully passed on a significant part of the costs to consumers, partly due to already weak consumption. Firms may soon be left with little choice: 3Q data shows that economy's restructuring is not yet bearing fruit. The combination of still-contracting productivity growth coupled with higher unit labour costs points to increasing headwinds,” the report stated.