Singapore manufacturers' business sentiment improves, services sector less upbeat

COMPANIES in Singapore's manufacturing sector expect business conditions to improve in the first half of 2020, although the services sector is less optimistic.

This is according to separate surveys by the Economic Development Board of Singapore (EDB) and the Singapore Department of Statistics (SingStat) released on Friday.

In the services sector, a net weighted balance of 2 per cent of firms predict a less favourable business outlook from January to June 2020, SingStat's survey showed.

While this is weaker than the outlook for half year from October 2019 to March 2020 (1 per cent net weighted balance), it is an improvement from the year-ago results of a -4 per cent net weighted balance.

Within the services sector, the companies that foresee more favourable business conditions in H1 2020 are in the industries of finance and insurance, information and communications, and recreation, community and personal services.

On the other hand, those in the accommodation, retail trade, and food and beverage services industries are less upbeat, SingStat said.

The overall services sector also expects operating receipts to decrease in the first quarter of 2020, compared with Q4 2019.

As for the manufacturing sector, EDB's survey showed that all clusters - except the general manufacturing industries cluster - are optimistic about better business prospects in the first six months of this year.

While majority of manufacturers (a weighted 74 per cent) believe business conditions will remain the same, a weighted 19 per cent expect conditions to improve, and a weighted 7 per cent are pessimistic.

Overall, a net weighted balance of 12 per cent of Singapore manufacturing firms anticipate an improved business situation this January to June, compared to Q4 last year.

In particular, sentiment in the electronics cluster turned positive, with a net weighted balance of 23 per cent of firms expecting an improved operating environment in the next six months compared with the previous quarter. This positive outlook is "largely attributed to the semiconductors segment which expects demand to improve" with the roll-out of 5G technology, as well as expectations that the US-China trade conflict is unlikely to deteriorate further, EDB said.

In the transport engineering cluster, a net weighted balance of 15 per cent of firms are optimistic.

The least optimistic in the sector is the general manufacturing industries cluster, where a net weighted balance of 4 per cent of firms have a gloomy outlook about the next six months.

Within the general manufacturing cluster, the food, beverages & tobacco segment is expecting seasonally weaker orders in Q1, while the printing segment believes that increased digital adoption will continue to weigh on demand for print jobs, EDB said.

In terms of output, the precision engineering cluster is the most upbeat among manufacturers. A net weighted balance of 38 per cent of precision engineering firms project a higher level of production in Q1 this year, compared to the previous quarter. EDB said this optimism is led by the machinery and systems segment, which expects increased production of semiconductor-related equipment, on the back of an improved outlook in global semiconductor demand.

In contrast, the two clusters of general manufacturing industries and biomedical manufacturing foresee a drop in their output in Q1, compared to Q4 2019.

As for employment forecasts, the bulk of companies in the manufacturing sector expect Q1 employment levels to remain similar to that in the preceding quarter.

Overall, a net weighted balance of 3 per cent of Singapore manufacturers plan to hire fewer workers in the next three months.