Singapore business expectations up for next six months; services show signs of strengthening

BOTH the services and the manufacturing sectors in Singapore showed signs of further strengthening as more firms expect improved business conditions in the six months ending March 2018, based on figures from the Economic Development Board and the Department of Statistics (Singstat).

The services sector, in particular, showed a significant leap in business optimism with more expecting business conditions to improve compared to those who foresee a deterioration, resulting in an overall net weighted balance of 9 per cent of businesses which see an improved outlook between October 2017 and March 2018, compared with the period of April to September 2017. This is higher than the 5 per cent registered a quarter ago.

The manufacturing sector also turned a notch more positive, with an overall net weighted balance of 5 per cent which expect an improvement, up from 4 per cent previously.

The majority of firms in both sectors, however, expect the business situation to remain similar to a quarter ago.

All industries within the services sector, except for the real estate industry, foresee an improvement in business outlook for the next six months.

Firms in the food and beverage services, retail trade, and accommodation industries expect the year-end festivities to positively impact business, resulting in net weighted balances of 34 per cent, 19 per cent and 11 per cent respectively.

Those in the financial and insurance industry also expect a pickup in business conditions, with 20 per cent which foresee an improvement.

The real estate industry was the only laggard in this quarter, with a net weighted balance of 5 per cent which see a weaker outlook for the coming six months. Within the industry, firms engaged in the leasing of commercial premises expect weaker demand for their services.

As for the manufacturing sector, the precision engineering cluster is the most optimistic in the next six months, with a net weighted balance of 22 per cent of firms anticipating improved business conditions ahead.

This is led by the machinery and systems segment which foresees higher demand for semiconductor-related equipment, as well as measuring devices supporting the wireless communications and automotive industries in months ahead.

The chemicals cluster saw a net weighted balance of 17 per cent of firms which project an improved business situation. Within the cluster, the petroleum segment expects winter and the year-end festive season to support the demand for oil products such as kerosene and naphtha.

The biomedical manufacturing cluster also saw more positive sentiment, with a net weighted balance of 12 per cent of firms which foresee favourable business conditions. This is driven by the medical technology segment which expects demand for medical devices from the US and European Union to remain strong.

In particular, the electronics cluster was found to be the least optimistic, with a net weighted balance of 11 per cent which expect a less favourable operating environment in the next six months.

Most of the segments within electronics anticipate business prospects to be seasonally softer over the next six months.

The sentiment among the general manufacturing firms was also pessimistic, with a net weighted balance of 9 per cent which foresee slower business. The outlook for this cluster is weighed down largely by the lacklustre domestic construction activities.