Business outlook improves for S’pore manufacturers, service firms: Surveys

SINGAPORE – Singapore manufacturers have turned slightly positive about business conditions in the next few months after three straight quarters of gloom, while companies in the service sector are marginally more upbeat, according to separate survey reports released on Friday.

A net weighted balance of 2 per cent of manufacturers expect a more favourable business situation from April to September 2023, improving from the previous quarterly poll where 25 per cent were pessimistic, a report from the Economic Development Board showed.

For service firms, a net weighted balance of 4 per cent are optimistic, up from 3 per cent previously, 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.

A weighted 12 per cent of manufacturers expect business conditions to improve, while a weighted 10 per cent foresee a weaker business outlook.

Within the manufacturing sectors, the transport engineering cluster is the most optimistic about business in the next few months, followed by electronics and chemicals.

The transport engineering cluster has a net weighted 50 per cent of firms expecting the business outlook to improve.

For the electronics cluster, a net weighted balance of 7 per cent of firms have a positive outlook. This is largely due to the semiconductors segment, on expectations that continuing inventory adjustments in customers’ end markets will support chip demand.

A net weighted balance of 4 per cent of firms in the chemicals cluster predict better business prospects.

On the other hand, the general manufacturing cluster has a net weighted balance of 16 per cent of firms expecting poorer business conditions. Firms in the food, beverages and tobacco; printing, and miscellaneous segments are concerned about higher raw material and operating costs.

Similarly, the precision engineering cluster has a negative outlook, with a net weighted balance of 25 per cent of firms expecting lacklustre business prospects to continue. Firms in the machinery and systems segment are concerned about United States export restrictions on advanced chips and chip equipment to China, and that near-term macroeconomic headwinds will weigh on orders for semiconductor-related equipment.

In terms of hiring, a majority of manufacturers (a weighted 76 per cent) expect the employment level in the second quarter of 2023 to remain similar to the previous quarter’s.

Among manufacturing firms, those in electronics and precision engineering are the least optimistic in their employment outlook.

In the service industry, 19 per cent of firms are upbeat about business conditions, while 15 per cent are gloomy, resulting in a net weighted balance of 4 per cent of firms with a positive outlook.

The most optimistic firms are found in accommodation, with a net weighted balance of 21 per cent, followed by recreation, community and personal services; then food and beverage services, professional services, and finance and insurance.

However, companies in retail trade, real estate, wholesale trade, and transportation and storage expect business conditions to deteriorate.

Noting the positivity in the accommodation segment, SingStat said that hoteliers cited the expected increase in Mice (meetings, incentives, conventions and exhibitions) events and the roster of events such as the Singapore Grand Prix in September as reasons for optimism.

A net weighted balance of 5 per cent of firms in the service sector foresee higher revenue for the period of April to June in 2023 as compared with the previous three months.

On employment, the majority of companies in the service sector see an increase in hiring. The exceptions were wholesale trade, retail trade and real estate.

“Firms within the accommodation industry expect to increase hiring to keep pace with the recovery of international travel,” said SingStat.

“In line with their positive revenue outlook, firms in the recreation, community and personal services industry expect employment levels to increase as well.”