Services is driving overall growth.
In Singapore's drive to greater business productivity, it seems that the services sector is the one doing all the heavy lifting. This chart from Moody's shows that productivity in the manufacturing sector—once pivotal in driving overall productivity growth—has been on a steady decline in recent years.
Moody's noted that manufacturing productivity outperformed services until the early 2000s, but has somewhat converged with the latter since then. However, this trend has turned over the past year, with services outperforming manufacturing in 2015.
"More recent data suggest that services, specifically wholesale and retail trade and finance and insurance, have been posting steady improvements in productivity and driving up the overall ratio. Over 2015, value added per worker in services industries grew 0.2%, compared to a 3.1% contraction in manufacturing industries," Moody's noted.
Although the role of manufacturing is still pivotal in driving overall economic growth, the sector's share of employment has been on the decline since the 1990s, Moody's said.
“This process of 'de-industrialization' is a common feature in advanced economies and can be explained as a consequence of higher productivity in manufacturing due to technological progress. However, productivity
gains have been fading – unit labour costs in manufacturing steadily rose between 2010 and 2014, following declines in the previous two decades. The MTI attributes the rise in unit labour costs to wage increases outpacing gains in labour productivity,” Moody’s said.
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