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Outlook sours in key sectors; economists warn of 2019 slowdown
FIRMS here are gloomier about the business outlook for the six months to next March, according to official quarterly polls out on Wednesday.
Sentiment has worsened in both the manufacturing and services sectors, and economy watchers said the trend could point to a slowdown next year.
A net weighted balance of one per cent of manufacturers were bearish on business prospects in a fourth-quarter survey, said the Economic Development Board (EDB). This is a reversal from the 7 per cent that foresaw improvements in the third quarter.
Meanwhile, a net weighted balance of 3 per cent of services firms expect business to pick up, easing from 9 per cent in the quarter prior, according to the Department of Statistics (SingStat).
The net weighted balance is the difference between the proportion of optimistic and pessimistic firms polled.
Maybank Kim Eng senior economist Chua Hak Bin, who has cut his economic growth forecast for next year from 2.7 per cent to 2.2 per cent, said: "The risk is still tilted towards the downside, even after the revision."
Global trade conflicts - notably between the United States and China - and Singapore's property cooling measures are prominent storm clouds.
Manufacturers' hopes have been dragged down by industry segments such as machinery and systems, in the precision engineering cluster, and infocomms and consumer electronics, in the electronics cluster.
These segments expect orders to decline, due to trade tensions worldwide, EDB said in its report.
Just two of Singapore's manufacturing clusters reported glowing prospects: transport engineering, with expectations of more repair work at shipyards and aerospace companies; and biomedical production, led by export orders in medical technology.
Meanwhile, real estate was a lead weight on the services sector. It was the only industry to predict a weaker business environment, with a negative net weighted balance of 18 per cent.
"Real estate developers continue to expect the government property cooling measures, including the additional buyer's stamp duty and loan-to-value limits, to have a negative impact on the property market," SingStat said, citing market interventions that kicked in overnight in July.
Other services industries reported a largely cheery outlook for the six months, led by food and beverage services, retail trade and accommodation.
There may be a seasonal bump in play, as SingStat noted that the period to March next year coincides with the year-end holidays and festive season. Both Christmas and Chinese New Year fall within this timeframe.
Hopes were still up - albeit not as high - in other services industries, such as transport and storage, wholesale trade, and finance and insurance.
United Overseas Bank (UOB) senior economist Alvin Liew said services sentiment remains positive, far from the low of negative 14 per cent between January and June last year.
But he told The Business Times: "We still have to focus on the outlook for those services segments that are trade-related. It could get worse if the US-China trade spat escalates further."
Even domestic-oriented industries could also feel the effects of a slowdown in China, as a decline in tourism might hit receipts here, he said.
Any slump in services, especially if worsened by trade woes, would compound a sour mood over the softening in manufacturing performance.
The Republic's factory output saw a surprise drop of 0.2 per cent in September. Selena Ling, head of treasury research and strategy for OCBC Bank, said in a note that this may not have been an outlier "but could manifest more clearly in the quarters ahead, especially in the first quarter of 2019".
UOB's Mr Liew said: "The broad consensus, including ours, is that there will be a weaker growth outlook in 2019 . . . How weak it will get is actually still the big question."