SINGAPORE’S manufacturers and services firms are slightly more positive about business conditions in the next six months, separate quarterly surveys showed on Tuesday (Oct 31).

A net weighted balance of 7 per cent of manufacturers are optimistic about prospects from October to March, up from 6 per cent in the previous quarterly survey, going by the latest release from the Economic Development Board (EDB).

This marked the third consecutive quarter of positivity, following three consecutive quarters of pessimism.

For services firms, a net weighted balance of 9 per cent are upbeat about business conditions, up from 8 per cent previously, in a similar survey by the Department of Statistics.

The net weighted balance is the difference between the weighted shares of positive and negative responses, with a positive figure indicating more optimism than pessimism.

In manufacturing, a weighted 19 per cent expect improved conditions ahead, against 12 per cent bracing for circumstances to worsen.

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DBS economist Chua Han Teng expects gradual manufacturing recovery in the coming months, while Maybank economist Chua Hak Bin foresees modest recovery in 2024.

But recovery would likely be fragile, DBS’ Chua cautioned, flagging “high interest rates in advanced economies, bumpy conditions in China, and lingering geopolitical tensions”.

Sentiments were mixed among clusters, with transport engineering the most upbeat.

Positivity in the cluster was led by the marine and offshore engineering segment, due to orders from the oil and gas as well as renewable energy industries; and the aerospace segment, on strong global air travel demand.

The electronics cluster’s expectations improved to the highest net weighted positive balance since September 2021, noted DBS’ Chua. This was largely due to the semiconductors segment, with remaining segments foreseeing a worsened business environment.

The least optimistic clusters were chemicals and biomedical manufacturing. Firms in the chemical cluster’s specialities and petroleum segments expressed concerns over weak regional demand and high domestic operating costs.

Meanwhile, biomedical manufacturing’s medical technology segment expects softer demand for life science instruments and consumables, given the softer macroeconomic outlook and customers’ excess inventory.

Overall, a net weighted balance of 10 per cent of manufacturers expect lower output from October to December, compared with 6 per cent expecting higher output in the previous quarter.

For the fourth quarter, the majority of clusters expect output to fall, led by precision engineering. The transport engineering and chemicals clusters are the exceptions that expect higher production.

A net weighted balance of 3 per cent of manufacturers expect hiring activities to soften in Q4, and EDB said a majority of firms expect employment levels to remain similar to the third quarter.

Outlook for services firms

In the services sector, 18 per cent of firms are optimistic about business conditions for October to March, while 9 per cent are preparing for a deteriorating climate.

Almost all industries expressed positive sentiments on conditions for October to March, with administrative and support services alone recording unchanged sentiments.

Noting that sentiment of wholesale trade companies turned modestly net positive after being negative for the past four surveys, DBS’ Chua said: “This reflects that a gradual recovery could be on the cards, due to an improvement in world merchandise trade in 2024, as seen from the World Trade Organisation’s projections.”

In accommodation, hoteliers expect an increase in tourism due to year-end festivities, while retail trade and food and beverage services firms project increases in sales due to the Christmas, New Year and Chinese New Year festive periods.

These three industries remain key beneficiaries of ongoing tourism recovery, DBS’ Chua noted.

Inbound tourism is forecast to return to pre-pandemic levels in 2024, he said, “but with tapered growth amid moderate reopening tailwinds”.

Maybank’s Chua added that recovery in financial, professional and trade-related services would offset fading growth in “revenge” services sectors, including travel and dining.

The sharp increase in optimism from professional services – mainly due to accounting, consultancy and engineering firms – is encouraging, he said, noting that the improvement was reflected in Q3’s gross domestic product (GDP) flash estimates.

“Overall, we think the survey suggests that Q4 GDP will likely improve but only marginally, to a range of about 1 per cent to 1.5 per cent (versus 0.7 per cent year on year in Q3),” he said.

A net weighted balance of 10 per cent of firms in the services sector foresee higher revenue in the last quarter of the year, the same as in Q3, with all industries projecting higher revenues.

In terms of employment, all industries in the services sector expect to increase hiring activities in Q4, with a net weighted balance of 12 per cent foreseeing this, against 9 per cent for Q3.

*Amendment note: A previous version of the photo caption incorrectly stated the period for the services sector’s general business outlook forecast. The caption has been updated to amend this.