Singapore manufacturing sentiment weakens as rising costs cloud 6-month outlook

SINGAPORE manufacturing sentiment has slumped as rising costs fuel caution, despite the global improvement in the Covid-19 pandemic situation, official polls showed on Friday (Apr 29).

Among manufacturers, a net weighted balance of 2 per cent expect business conditions to be better in the next 6 months than in the 3 months prior. This is a slowdown from the 8 per cent recorded by the Economic Development Board (EDB) in the previous survey in end-2021.

Meanwhile, in the services sector, a net weighted balance of 15 per cent of firms expect more favourable business conditions in the next 6 months than in the prior 6 months, comparable with 14 per cent in the last survey.

The Department of Statistics (SingStat) noted that the poll was carried out during a period where policymakers announced major relaxations of domestic and travel restrictions.

The net weighted balance, used to gauge business sentiment, is the difference between the weighted shares of positive and negative responses.

In manufacturing, a weighted 15 per cent of companies expected business to pick up in the next 6 months, unchanged from the previous poll. But the weighted share of businesses with a negative outlook rose to 13 per cent, from 7 per cent previously.

GET BT IN YOUR INBOX DAILY

Start and end each day with the latest news stories and analyses delivered straight to your inbox.

Sign UpVIEW ALL

“The manufacturing sector is cautious in its business outlook for the period April to September 2022, as the ongoing Russia-Ukraine conflict adds to supply chain and inflationary pressures, resulting in higher cost of operations,” the EDB said in its report.

The transport engineering cluster was the most optimistic, with a net weighted 33 per cent of firms expecting the operating environment to improve. The aerospace segment eyed a pick-up in aircraft maintenance, repair and overhaul work as aviation recovers from the pandemic, while marine and offshore engineering is expected to benefit from higher crude prices.

Still, the level of optimism was a retreat from the 54 per cent reported in the last survey.

Meanwhile, a net weighted balance of 15 per cent in precision engineering and 8 per cent in electronics expect better business in the next 6 months, with optimism rising quarter on quarter amid continued robust demand for semiconductors.

But sentiment was far weaker in the chemicals cluster, where a net weighted balance of 13 per cent of firms foresee a worsening business situation. The cluster was dragged down by the petrochemicals segment, which cited excess supply and weakening margins as the war in Ukraine, which was invaded by Russia in February, drives up feedstock costs.

Biomedical manufacturing saw a net weighted balance of 22 per cent of companies projecting weaker business conditions, which the EDB said was mainly due to expectations of material shortages and rising costs in the pharmaceuticals segment.

Still, an overall net weighted balance of 25 per cent of manufacturers expect output to increase quarter on quarter in the April-to-June period, up from 2 per cent in the previous survey.

A net weighted balance of 21 per cent of manufacturers expected to step up hiring in the second quarter against the 3 months prior, compared with 12 per cent in the last poll.

Meanwhile, optimism in the services sector extended to all industries except retail.

Transportation and storage firms were the most upbeat, with a net weighted balance of 23 per cent reporting positive sentiment - up from 17 per cent in the previous poll - on the back of an expected rebound in demand for air travel.

The positive sentiment in the wholesale trade (19 per cent) and finance and insurance (18 per cent) industries were largely stable on the previous quarter’s survey, while the positive outlook in recreation, community and personal services jumped to a net weighted balance of 16 per cent, from 11 per cent previously.

“Operators of sports facilities expect to organise more events and with larger capacities. Healthcare providers foresee increased demand for their services as non-urgent elective surgeries are able to resume,” SingStat said in its report.

Accommodation services providers were also more upbeat, with the net weighted balance of optimistic businesses rising to 15 per cent, from 5 per cent before.

But the positive net weighted balance in food and beverage services retreated to 3 per cent, from 8 per cent previously, and retailers slipped into the red with a negative net weighted balance of 5 per cent, compared with a positive 11 per cent before.

SingStat said the retail industry expects slower business from April to September 2022 than from October 2021 to March 2022, as the earlier period included year-end holidays.

Overall, a net weighted balance of 16 per cent of services firms expected receipts to increase quarter on quarter in the April-to-June period - up from the 12 per cent that had projected revenue growth in the last survey.

A net weighted balance of 11 per cent expect hiring activity to pick up, compared with 9 per cent before, with the employment outlook the rosiest in accommodation (23 per cent), wholesale trade (19 per cent), and transportation and storage (19 per cent).

Amendment note: A previous version of the story wrongly stated the employment outlook in the services sector. The article has been amended to reflect this change.