You are here


Sentiment tanks, services firms less upbeat in H2: surveys

Overall, this equates to a net weighted balance of 11 per cent of manufacturers predicting a declining business situation.


BUSINESS sentiment for the second half of 2019 sank among manufacturers and services firms in Singapore on the back of global trade tensions, according to two surveys released on Wednesday.

The surveys, which polled businesses on their outlook for July to December 2019, were released by the Economic Development Board (EDB) for the manufacturing sector and the Department of Statistics (Singstat) for services. A weighted 22 per cent of manufacturers expect a softer business outlook, while only a weighted 11 per cent anticipates business conditions to improve.

Overall, this equates to a net weighted balance of 11 per cent of manufacturers predicting a declining business situation. This was a sharp dive from a year ago, which saw a net weighted balance of 7 per cent of firms which expected an improvement for the same period in 2018. It also worsened from the previous quarter, where a net weighted balance of one per cent anticipated a better business outlook between April and September 2019.

OCBC economist Selena Ling said that the results "clearly reflect the erosion of business confidence amid the persistent global trade tensions which has dragged on for a year".

Your feedback is important to us

Tell us what you think. Email us at

Manufacturing - which makes up about one-fifth of Singapore's economy - has been roiled by uncertainties from the trade conflict, slowing demand in China, and the peaking of the electronics cycle in the past year.

It has been the main drag to Singapore's economy in 2019 and reflected in a slew of dismal data, including double digit declines in exports, contracting Purchasing Managers Index figures (a barometer of manufacturing activity), and falling industrial production numbers.

But according to the EDB survey, not all is doom and gloom in the manufacturing sector. The biomedical manufacturing cluster is the most optimistic, supported by the pharmaceuticals segment which anticipates higher export demand for biological products.

In contrast, the chemicals, electronics and precision engineering clusters are the most downbeat. The chemicals cluster is concerned about declining refining margins and weaker demand, particularly China. In electronics and precision engineering, the weaker outlook is mainly due to the subdued demand for semiconductors and semiconductor-related equipment, as well as uncertainties from the US-China trade conflict that has broadened to the global technology sector.

On the employment front, a net weighted balance of 1 per cent of manufacturers plan to hire fewer workers in the third quarter of 2019 compared to the preceding quarter. Among the clusters, firms in the general manufacturing industries and precision engineering project a smaller workforce in the next three months.

On the outlook for the sector, Ms Ling said: "Looking ahead, we expect 3Q19 to remain challenging for the manufacturing sector, barring a quick resolution in the US-China trade and tech war."

With manufacturing particularly hard hit, it was hoped that the services sector - which makes up about two-thirds of the economy - could cushion the impact and help prop up the economy.

However, in a separate survey by Singstat, it was found that the business expectations of services firms have also moderated for the second half of 2019, even though it remained in positive territory.

Some 12 per cent of firms foresee slower business, while 14 per cent of firms are optimistic about business conditions. This results in a net weighted balance of 2 per cent of firms predicting a more favourable business outlook - weaker than the 9 per cent recorded for the same period last year. It also eased from the 4 per cent seen in the previous quarter.

This comes as the services sector is also vulnerable in Singapore's open economy, although export-oriented factories fare the worst in a global trade war.

Within the services sector, the accommodation and food & beverages (F&B) services are the most upbeat, mainly due to the year-end festive season and the upcoming Formula One night race in September 2019. Meanwhile, the retail trade, wholesale trade and financial & insurance industries are the most pessimistic, partly due to the trade conflict.

In terms of employment, the services sector still expects an increase in hiring activity in the third quarter, with a net weighted balance of 5 per cent. Firms in the retail trade expect to cut back on hiring, while those in F&B services and real estate are the most positive about adding to their headcount.

The survey results - conducted over June and July 2019 with a total of about 1,897 firms - came out hours before the US Federal Reserve is expected to cut interest rates for the first time in more than a decade on Wednesday, amid a global economic slowdown.

With Singapore at risk of a technical recession, or two straight quarters of quarter-on-quarter contractions, expectations are high among economists that the official full-year growth forecast for 2019 (which currently stands at 1.5-2.5 per cent) will soon be cut. Market watchers are also projecting that monetary policy could also be eased in October, if the outlook continues to deteriorate.

BT is now on Telegram!

For daily updates on weekdays and specially selected content for the weekend. Subscribe to