Singapore manufacturers, services firms slightly more upbeat about outlook for next 6 months
SINGAPORE manufacturers and services firms appear slightly more upbeat about business conditions in the next six months compared to the previous quarter, separate quarterly surveys showed on Friday (Apr 28).
A net weighted balance of 2 per cent of manufacturing firms anticipate a favourable business situation from April to September, according to the latest release from the Singapore Economic Development Board (EDB).
This is the first improvement for the sector after three straight quarters of pessimism. In the previous quarter, a net weighted balance of 25 per cent of manufacturers were expecting a less favourable situation from January to June.
For services firms, a net weighted balance of 4 per cent are optimistic about conditions from April to September, inching up from the previous quarter’s 3 per cent, a similar survey by the Department of Statistics (SingStat) found.
The net weighted balance is the difference between the weighted shares of positive and negative responses, with a positive figure indicating more optimism than pessimism.
The turn in sentiment, particularly for the manufacturing sector, is encouraging, economists said.
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Maybank senior economist Chua Hak Bin said it suggests that the manufacturing downturn may be “shallow and short”, and that China’s reopening may be improving the outlook and offsetting the weaker demand in advanced economies.
OCBC chief economist Selena Ling said the turnaround – largely due to the anticipated improvement in the electronics sector, and especially for semiconductors – probably signals the worst is over. “This seems to echo the recent guidance from large global chipmakers such as Samsung and SK Hynix that the global tech industry should start emerging from its current downturn later this year,” she added.
Among manufacturers, a weighted 12 per cent expected improved conditions for the same period, compared with a weighted 10 per cent who foresee a weaker business outlook.
The transport engineering cluster is the most hopeful, with a net weighted balance of 50 per cent of firms expecting favourable business conditions. This was led by the aerospace segment, which continues to expect higher demand for aircraft maintenance, repair and overhaul jobs amid strong demand for air travel.
Other clusters that were optimistic about business conditions were:
- Electronics (7 per cent)
- Chemicals (4 per cent)
Biomedical manufacturing sentiments were unchanged.
Sentiment in the precision engineering cluster turned a shade worse with a net weighted balance of 25 per cent of firms expecting lacklustre business prospects.
Business expectations among firms in general manufacturing eased slightly, with a net weighted balance of 16 per cent anticipating worse business conditions.
Overall, a net weighted balance of 1 per cent of manufacturers expect higher output in Q2, compared to the previous quarter. All clusters except electronics and chemicals project a higher level of production.
Over three-quarters of firms reported no limiting factors that would affect their ability to obtain export orders in Q2.
A weighted 76 per cent of manufacturers expect employment levels in Q2 to remain similar to the previous quarter. Hiring activities are also expected to remain similar.
A weighted 70 per cent of manufacturers plan to invest in plant and machinery in the next 12 months, up to March 2024. Among them, half expect higher or similar levels of capital expenditure, compared to the past 12 months.
In the services industry, 19 per cent of firms are upbeat about business conditions while 15 per cent are bracing for deteriorating conditions from April to September.
A majority of services firms had an optimistic business outlook:
- Accommodation (21 per cent)
- Food and beverage (F&B) services (15 per cent)
- Finance and insurance (15 per cent)
- Professional services (15 per cent)
- Administrative and support services (8 per cent)
- Recreation, community and personal services (20 per cent)
Sentiment was unchanged among information and communications firms, while four industries reported a pessimistic outlook:
- Wholesale trade (-7 per cent)
- Retail trade (-19 per cent)
- Transport and storage (-5 per cent)
- Real estate (-11 per cent)
A net weighted balance of 5 per cent of firms in the services sector foresee higher revenue in Q2. Over 20 per cent of firms in recreation, community and personal services, F&B services and accommodation are expecting this.
In terms of employment, the majority of industries expect to increase hiring activities in Q2. The exceptions were wholesale trade, retail trade and real estate.
OCBC’s Ling noted that the underlying picture for the services sector is more mixed.
“Real estate may see more downside from here given the latest cooling measures just announced this week, while sentiments for wholesale trade and transport and storage are also deteriorating in line with the growing growth headwinds,” she said.
Meanwhile, the retail industry may be turning more cautious, even as tourists return, due to higher inflation, the labour crunch and rising wage costs, said economists.
“Tourists may also be spending more on services rather than goods, as retail prices are less competitive because of the strong currency, rents and GST,” Maybank’s Dr Chua added, referring to the recent hike in the Goods and Services Tax (GST).
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