Little to cheer for factories as festive season nears

A display of electronic devices at the Hong Kong Electronics Fair in Hong Kong earlier this month. Many Asian countries see gloomy times ahead, having seen exports fall this year as compared with last year. In Singapore, nearly 40 per cent of electro
A display of electronic devices at the Hong Kong Electronics Fair in Hong Kong earlier this month. Many Asian countries see gloomy times ahead, having seen exports fall this year as compared with last year. In Singapore, nearly 40 per cent of electronics firms expect conditions to worsen. PHOTO: AGENCE FRANCE-PRESSE

Manufacturers are expecting tough months ahead as the global economy slows down

Christmas may be around the corner, but it is not likely to bring much cheer to the manufacturing sector here.

Manufacturers are bracing themselves for a tough few months ahead, and many expect demand to fall ahead of the festive season, according to an Economic Development Board survey that polled 400 firms. It found that 26 per cent of respondents expect business conditions to worsen in the next six months amid the slowing global economy that has been dragged down by weak oil and commodity prices. Only 10 per cent expect conditions to improve.

The EDB added that the "softer business expectation in the manufacturing sector is broad-based, with most clusters foreseeing a weaker business outlook in the six months ahead except the biomedical manufacturing cluster".

Chemicals and electronics are the most pessimistic sectors.

  • 26%

  • expect business conditions to worsen in the next six months

  • 10%

  • expect conditions to improve

Nearly 40 per cent of electronics firms expect conditions to worsen while 24 per cent of firms polled in the chemical sector felt that way.

The dismal outlook also extended to manufacturing output, with all industries, except the biomedical sector, expecting to produce less between this month and December.

Singapore is not alone in feeling the pain, with many Asian countries seeing gloom ahead, said HSBC economist Frederich Neumann. "This should be peak season for Asian exporters. As Western shoppers gear up for Christmas, shelves need to be stocked with everything from smartphones and socks, to tablets and trinkets. Trouble is: Shipments continue to be soggy," he said.

He noted that most Asian countries have seen exports fall this year from last year, with the exception of Indonesia and Vietnam.

"And there is little improvement in sight... The region's trade slowdown reflects structural, and not just cyclical, factors," he said.

"This will be a long, slow grind."

Data from trade agency IE Singapore showed that Singapore's trade fell significantly last month.

Total trade contracted by 9.8 per cent last month, compared with the same period last year. Total exports were also down 8.9 per cent last month over the same month last year.

Singapore manufacturing firms were likewise downbeat about their prospects over the next few months, with many listed firms putting out sombre forecasts.

Regional electronics components distributor Excelpoint Technology said that apart from handsets and consumer wireless sectors, it expects weaker demand for the rest of the year.

Similarly, electronics and lighting manufacturing firm Aztec warned that the slower global growth and continuous currency volatility will "pose strong headwinds for the next 12 months".

The big companies are also not spared from falling demand.

On Thursday, Sembcorp Industries warned that intense competition in the energy sector, weak oil prices and a shaky global economy will weigh on its business in the months to come.

A version of this article appeared in the print edition of The Straits Times on October 31, 2015, with the headline 'Little to cheer for factories as festive season nears'. Print Edition | Subscribe