Manufacturing and services firms in Singapore upbeat about second half of 2024: Surveys

SINGAPORE - Manufacturing and services companies here expect business conditions to improve from July to December, compared with the second quarter of 2024.

This is on the back of growing demand in semiconductors, increased travel and consumer spending, two surveys out on July 31 showed.

A net weighted balance of 23 per cent of manufacturing firms anticipate an improved business situation for the months ahead, according to a study by the Economic Development Board (EDB). They also expect higher output in the third quarter of 2024, compared with the second quarter.

Among services companies, a net weighted balance of 13 per cent of companies expect a more favourable business outlook, a survey by the Singapore Department of Statistics (SingStat) showed. They also foresee higher revenue from July to September.

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. 

Within the manufacturing sector, all clusters except the biomedical manufacturing cluster see better business prospects for the rest of 2024.

The electronics cluster is the most upbeat, with a net weighted balance of 40 per cent of firms projecting improved business conditions in the second half of 2024.

“This is largely attributed to the semiconductors segment, which anticipates better demand for consumer electronics devices and robust growth in artificial intelligence (AI) applications, with the latter boosting orders for memory, storage and networking chips,” EDB said.

The transport engineering cluster also remains optimistic, led by the aerospace and marine and offshore segments. These segments expect healthy demand for aircraft maintenance, repair and overhaul jobs with global air travel surpassing pre-pandemic levels. The companies also anticipate more orders from the global oil and gas and renewables markets.  

In the general manufacturing cluster, food, beverage and tobacco companies expect increased orders for beverages and confectioneries due to festivities in the months ahead, EDB noted.

Meanwhile, the miscellaneous industries segment expects continued demand for construction-related materials from the domestic construction sector. However, the printing segment remains pessimistic due to sluggish demand for print jobs. 

The precision engineering cluster also expects improved business conditions in the second half of 2024, compared with the second quarter of 2024. In particular, firms producing process control equipment, plastic precision components, bonding wires and electronic connectors anticipate higher demand from customers, EDB said.

However, the biomedical manufacturing cluster expects weaker business conditions ahead. “This cautious sentiment is driven by the medical technology segment, where concerns over global macroeconomic uncertainties and soft demand from key markets such as China are likely to weigh on orders for life science instruments,” EDB noted.

Most of the companies in the manufacturing sector also reported no limiting factors that would affect their ability to get export orders in the third quarter. But for those that anticipated challenges, the top two issues cited are price competition from overseas, or economic conditions abroad like geopolitical tensions and global inflationary pressures.

Over in the services sector, the accommodation industry foresees improved business conditions, with international travellers expected to grow due to the Singapore Grand Prix in September, as well as more concerts and Mice (meetings, incentives, conferences and exhibitions) events in the second half of 2024. 

The transportation and storage industry also expects a pickup in business, with increased freight rates for water transportation and more demand for land transport services, SingStat said.

Firms in the information and communications industry are also optimistic, with higher demand for data and cloud services as companies continue to spend on digitalisation.

The finance and insurance industry is also positive about the business outlook.

“Banks are hopeful of a possible decrease in interest rates, which would in turn lead to an increase in investment activities and higher demand for loans,” SingStat said. It added that payment services firms are also anticipating more travel and entertainment spending.

The wholesale trade industry also expects higher demand for AI-related products.

The majority of the services industries expects to increase hiring activities for July to September, SingStat noted. Those in accommodation want to keep pace with the arrival of more leisure and business travellers, for instance.