Businesses more pessimistic about first half of the year

Surveys find downbeat outlook widespread in manufacturing

Both manufacturing and services firms are more pessimistic about their prospects for the first half of 2016, going by separate surveys released yesterday by the Singapore Economic Development Board (EDB) and Statistics Singapore.

EDB said in its latest quarterly survey that a larger majority of manufacturers expect business to weaken due to global economic uncertainties, the ongoing slowdown in China and slumping oil prices.

Overall, a net weighted balance of 22 per cent of manufacturers anticipate a less favourable business situation for the January to June period, compared to the last quarter. This number is higher than the 16 per cent reported in the last quarterly survey. Now, only 7 per cent of manufacturers expect business conditions to improve while 29 per cent foresee things getting worse.

EDB said the more downbeat outlook was widespread, with almost all clusters foreseeing a decline in business situation in the first half-year. The exception is the biomedical manufacturing cluster, where a net weighted balance of 17 per cent of firms anticipate a positive business outlook.

Both the pharmaceuticals and medical technology segments are optimistic as there are plans to introduce new products in the former and strong export demand in the latter.

The transport engineering cluster was the most pessimistic, with a net weighted balance of 39 per cent of firms expecting business to remain challenging, particularly marine and offshore engineering firms. Demand for rigs and offshore conversions has been battered by persistently low oil prices.

For the services sector, a net weighted balance of 18 per cent of firms expect less favourable business conditions for the first half- year, compared to the fourth quarter of 2015. Business sentiment is more downbeat compared to the net weighted balance of -6 per cent in the previous quarter's survey and the -4 per cent for the same period last year.

Generally, the service sector is not as pessimistic as manufacturing. The majority of firms (a weighted 62 per cent) expect business to remain the same, while 10 per cent see it improving and 28 per cent expect it to slow.

Statistics Singapore said all industries within the services sector expect the level of business activity to remain the same or decline for the first half-year.

After the busy year-end holiday period, accommodation and food and beverage firms expect less business. For the transport and storage services industry, a net weighted balance of 33 per cent of firms expect business to deteriorate. In particular, water and air transport firms expect lower cargo and passenger volume in the coming months.

Firms in the real estate industry continue to expect less favourable business conditions. Developers cite government measures including the Additional Buyer's Stamp Duty and Total Debt Servicing Ratio, as well as the uncertain economic situation for the weak demand in the property market.

For the wholesale trade industry, a net weighed balance of 27 per cent of firms anticipate slower business. Wholesalers of petroleum and petroleum products cite falling oil prices for their negative sentiments. Similarly, wholesalers of computers and computer peripherals expect lower demand for their products.

A version of this article appeared in the print edition of The Straits Times on January 30, 2016, with the headline 'Businesses more pessimistic about first half of the year'. Print Edition | Subscribe