56 The Economy
Overall investment, after a weak start, improved in the second and third quarters of the year, and improved distinctly in the fourth quarter. This was mainly attributable to a surge in machinery and equipment acquisition, particularly in the fourth quarter, supported by the continued brisk pace of business expansion and strengthened investor confidence. In contrast, building and construction activity remained slack all through 2005 putting a heavy drag on the growth of overall investment spending, although the rate of decline narrowed from that in 2004. The lacklustre performance was mainly due to the scaling back of the Public Housing Programme earlier as well as the relatively few large-scale infrastructure projects and private sector building projects in progress. Because of the building and construction weak spot, overall investment spending in terms of gross domestic fixed capital formation recorded only a moderate 4.1 per cent growth in real terms in 2005, although it was up from 3 per cent in 2004 (Chart 9).
Chart 9
Main components of domestic demand (year-on-year rate of change in real terms)
Per cent
15
10
5
0
Government consumption
expenditure
-5
-10
Private consumption expenditure
Investment expenditure
in terms of gross domestic fixed capital formation
-15
-20
1995 1996 1997 1998
1999
2000 2001 2002 2003 2004 2005
The growth in consumer spending in 2005 was indicative of stronger consumer sentiment on the back of improving employment and labour income. Overall investment spending improved thanks to a surge in machinery and equipment investment.
Net Output or Value-added by Major Economic Sectors
In 2005, the service sectors as a whole remained the dominant driving force of overall economic growth. In 2005, its net output or value-added rose markedly by 7.9 per cent in real terms over 2004. Among the constituent service sectors, transport and storage, import and export trade, financing and insurance, and communications showed the best performance, growing by 14.5 per cent, 12.1 per cent, 11 per cent and 10.8 per cent respectively in 2005. Meanwhile, the manufacturing sector also showed a small increase in net output of 2.1 per cent in 2005, supported by the recovery in domestic exports in the second half of the year. In contrast, the net output of the construction sector remained in decline, falling by 6.6 per cent in 2005.