Over the five-year period from 2011 to 2016, the unit business cost index for the manufacturing sector (UBCI) rose marginally by 0.1 per cent on a compounded annual growth rate (CAGR) basis, while that for the services sector (USCI) increased by 0.4 per cent on a CAGR basis. However, more recently, the UBCI declined throughout the four quarters of 2016, bringing the UBCI for the year to a level that is 8.5 per cent lower than that in 2015. Although the USCI rose in the first three quarters of 20163, the increase of 0.1 per cent year-on-year over this period is a more moderate pace of increase than the average increase seen in the four years before, at 0.5 per cent per annum.

 

We next examine the business cost structure of the manufacturing and services sectors before discussing the drivers of recent business cost trends.

 

In the manufacturing sector, labour cost, work given out and royalty payments constitute the largest components of total business costs. These three components account for around 67 per cent of the business costs of large enterprises and 68 per cent of the business costs of small- and medium-sized enterprises (SMEs) in the sector. 

 

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