SINGAPORE - Global trade tensions and property cooling measures here have taken their toll on fourth-quarter business sentiment in the manufacturing and services sectors, according to separate updates from the Economic Development Board (EDB) and the Department of Statistics (SingStat) on Wednesday (Oct 31).

A net weighted balance of 3 per cent of services sector firms expects the business situation to improve between October 2018 and March 2019, compared with the previous six months - easing from a net weighted balance of 9 per cent in both the third quarter and the year-ago period.

The mood has turned even gloomier in the manufacturing sector, as amajority of companies expect conditions in the the next six months worsen - reversing the positive trend in recent surveys.

A net weighted balance of 1 per cent of manufacturers pointed to a softer business outlook - a turnaround from the net weighted balance of 7 per cent that saw brighter prospects in the third quarter.

The net weighted balance is the difference between the proportion of optimistic and pessimistic firms polled by the two agencies.

Maybank Kim Eng senior economist Chua Hak Bin told The Business Times over the phone: "It's fairly straightforward. Business expectations have taken a turn for the worse, led especially by electronics and precision engineering.

"It's consistent with what we saw in terms of the recent manufacturing contraction."

Singapore last week reported a surprise 0.2 per cent decline in September factory output.

The potential for a slowdown extends to the services sector, added Dr Chua, noting that global trade tensions could also affect industries such as wholesale trade and finance.

The EDB singled out two kinds of manufacturers as markedly gloomy: The machinery and systems segment in the precision engineering cluster and the infocomms and consumer electronics segment in the electronics cluster both anticipate weaker orders, amid growing concerns over global trade tensions, it said.

Infocomms and consumer electronics had a negative net weighted balance of 57 per cent, while machinery and systems had a negative net weighted balance of 44 per cent.

But the transport engineering cluster stood out for being the most optimistic, with a net weighted balance of 21 per cent of firms expecting the situation to pick up compared with the previous quarter.

Oil and gas equipment makers are crossing their fingers for more orders as oil prices improve, while shipyards and aerospace companies both predict more repair work in the next six months.

Also bucking the downward trend was the biomedical manufacturing cluster: A net weighted balance of 6 per cent of firms in this cluster reported good cheer, as export orders are expected to stay strong in the medical technology segment, despite a flat net weighted balance for pharmaceuticals.

Meanwhile, a weighted 70 per cent of manufacturers have reported no constraints on their ability to obtain export orders in the last quarter of 2018.

But a weighted 25 per cent have still named price competition from overseas rivals, as well as economic and political conditions abroad, as the top two limiting factors on export orders, said the EDB.

Separately, all industries within the services sector believe that business conditions will either improve or stay the same in the next six months - with the exception of the real estate industry.

The property sector saw a negative net weighted balance of 18 per cent, in the wake of the overnight market cooling measures unveiled by the authorities in July.

"Real estate developers continue to expect the government property cooling measures, including the additional buyer's stamp duty and loan-to-value limits, to have a negative impact on the property market," SingStat noted.

Otherwise, companies in the food and beverage services, retail trade, and accommodation industries all expect better business prospects in the six months to March 31, 2019, lifted by the year-end holidays and festivities such as Christmas and Chinese New Year.

Food and beverage services led the pack, with a net weighted balance of 36 per cent, followed by retail trade, at 29 per cent, and accommodation, at 17 per cent.

Computer programming and consultancy firms, as well as web portal service providers, are also looking forward to higher demand for their services, driving the information and communications industry to a net weighted balance of 13 per cent.

So are firms in the recreation, community and personal services industry - especially healthcare providers - with a net weighted balance of 5 per cent.

Optimism was more muted in transport and storage, which had a postive net weighted balance of 3 per cent.

Wholesale trade and non-real estate business services were both upbeat with a net weighted balance of 2 per cent, while the financial and insurance segment leaned towards optimism with a net weighted balance of 1 per cent.

United Overseas Bank (UOB) senior economist Alvin Liew noted that business sentiment in the services sector is still positive, and well above the recent trough of negative 14 per cent between January and June 2017.

But that low "does provide caution for downside", he told BT.

"We still have to focus on the outlook for those services segments that are trade-related. It could get worse if the US-China trade spat escalates further."

Besides manufacturing and outward-facing services segments, domestic-oriented industries could also feel the effects of a China slowdown, such as a hit to receipts from lower tourist numbers, said Mr Liew.

Maybank Kim Eng downgraded its forecast for Singapore's 2019 gross domestic product growth in mid-October, lowering it from 2.7 per cent to 2.2 per cent.

Dr Chua warned: "The risk is still tilted towards the downside, even after the revision."

Noting that full-year data for this year should be out by February 2019, he added: "The slowdown will be apparent, so, if need be, the government can address that in the Budget."

Mr Liew said: "I think we need to first get through this year before we can say for certain that things will get worse. By that, we mean the US mid-term elections in early November and then the meeting between US and China presidents at the G20 leaders summit."

Still, he added: "The broad consensus, including ours, is that there will be a weaker growth outlook in 2019 . . . How weak it will get is actually still the big question."