Dan's Steaks, a dining chain founded by former radio personality Daniel Ong that weathered the COVID-19 crisis by serving premium beef cuts to patrons in Singapore, is now being brought to its knees by an entirely different and uncontrollable force: inflation.

Ong revealed in July that his food and beverage operation was entering its "final chapter," bracing to "say goodbye in the next months." Having already shuttered three locations, he is set to close the last remaining restaurant in the city-state's northeastern residential district.

"The reality of running a restaurant has changed. Food costs continue to rise. Staff costs continue to rise. Rent continues to rise," Ong wrote on his Facebook page. "With increasing competition all around us, it has become impossible to keep going sustainably."

Ong's plight mirrors the pressures weighing on Singapore's broader services industry, even as the nation has posted impressive economic figures in recent months, driven by the global artificial intelligence frenzy that has boosted demand for Singapore's electronics exports.

Preliminary gross domestic product data for the July-September quarter released last week showed growth of 5.4% compared with a year earlier, as sustained AI-related demand powered the city-state's manufacturing sector. Although the expansion decelerated from 6.2% in the April-June period, it remained above 5% for the fourth straight quarter, still a strong reading for a developed economy.

The technology surge, however, has offered little relief to other industries, which continue to grapple with rising consumer prices and business costs. Growth in the subsector encompassing food, real estate and administrative and support services declined to 2.1% in the July-September period from 2.4% in the preceding quarter.

This month, opposition lawmaker Jamus Lim raised concerns in parliament about the food services sector. "Unlike manufacturing, or other tradeable services like finance or software, productivity gains are generally much lower for nontradable services like F&B (food and beverages)," said Lim, who is an economist by training. "The sector's already razor-thin margins have been forced to confront the double whammy of rising rent and costly labor more directly than most."

Singapore's core consumer inflation climbed to 2.2% year on year in August after reaching 2% in July, according to official statistics released in September. The August figure was close to a two-year peak.

Volatile oil prices have driven price surges globally in previous months, as tensions between Iran and the U.S. and Israel keep uncertainty elevated and restrict energy supplies. Some food and beverage establishments in Singapore raised prices this year in response to soaring costs, including higher electricity bills.

The business environment appears to have deteriorated further. According to data released this month by Singapore's statistics department, sales in the food and beverage segment dropped 1.6% year on year in August. Broken down by category, restaurant sales fell 2.1%, cafe sales declined 5.3%, and food courts and other eating establishments saw sales drop 4.8%.

"Finance, information and communications, and professional services also continued to expand at a solid pace, while consumer-facing and other domestic services lagged," noted Selena Ling, chief economist at Singapore's Oversea-Chinese Banking Corp.

"This divergence creates a dual-speed expansion where businesses linked to construction, trade and advanced electronics may continue to benefit from strong demand, while consumer-oriented sectors face a more challenging environment, especially on the domestic cost front and tightening financial conditions," she said.

Likewise, Ahmad Mobeen, principal economist at S&P Global Market Intelligence, said: "The softer performance of retail and food services suggests that domestic demand is less buoyant than the headline GDP figures imply."

The government is trying to help affected businesses. In July, it announced financial support for food stalls at local markets, providing assistance "in mitigating the impact of cost increases" for six months, from September to February next year. Operators will receive 200 Singapore dollars ($156) a month, which they can use to offset their monthly rent.

The Monetary Authority of Singapore, the central bank, in a review of macroeconomic conditions last week, highlighted that inflation is expected to remain "around current rates in the immediate quarters ahead," and "ease more discernibly from the middle of 2027."

The authority expects core inflation to average 1.5% to 2.0% this year and 1.5% to 2.5% in 2027. Meanwhile, economic growth is predicted to slow as the "AI-driven technology upcycle moderates" and global financial conditions tighten, it said.