Manufacturers less positive but services sector upbeat

Business optimism among local firms remained positive into the final stretch of this year, although manufacturers' optimism has receded quarter on quarter, even as firms in the services sector took a rosier outlook.

A net weighted balance of 16 per cent of manufacturers expect conditions to be better for the six months to March next year than in the third quarter, according to a survey from the Economic Development Board (EDB) yesterday. That is down from the 20 per cent in the previous poll in mid-2021.

Conversely, the net weighted balance of services firms expecting a more favourable business outlook picked up to 19 per cent from 11 per cent previously, in a similar survey conducted by the Department of Statistics (SingStat).

The net weighted balance, used to gauge business sentiment, is the difference between the weighted shares of positive and negative responses.

In manufacturing, a weighted 22 per cent of businesses pointed to better business conditions in the six months, down from 26 per cent previously, while the weighted share of companies forecasting weaker business was unchanged at 6 per cent.

Electronics manufacturers led the sector for optimism, with a net weighted balance of 27 per cent of companies expecting business to improve, which the EDB attributed to the "semiconductors segment which continues to expect robust demand from the 5G market, cloud services and data centres".

Still, this was a sharp decrease from 40 per cent before, as the mood turned negative in the computer peripherals and data storage, and other electronic modules and components segments, and stayed neutral in infocomms and consumer electronics.

In precision engineering, the net weighted balance of upbeat firms eased to 10 per cent from 15 per cent before on concerns over longer shipment lead time and rising costs due to supply-chain bottlenecks.

However, sentiment improved in transport engineering, with aerospace firms expecting more maintenance, repair and overhaul work as travel restrictions lift, while new orders in marine and offshore engineering remained weak.

In services, a net weighted balance of 25 per cent of firms held a positive outlook, up from 20 per cent before, while 6 per cent saw a deterioration, easing from 9 per cent previously.

The cheer was across the sector and highest in the transport and storage industry. "In particular, air transport firms are optimistic as Singapore extends Vaccinated Travel Lanes to more countries," SingStat said.

Optimism also picked up strongly for the finance and insurance industry, retailers and accommodation services, while food and beverage (F&B) turned optimistic.

The anticipated improvement in retail and F&B services comes ahead of year-end festive spending, with department stores, supermarkets, and clothes and shoes retailers among the more upbeat, SingStat said.

Hoteliers also expected more business due to the easing of travel restrictions and more bookings for staycations for the year-end holidays.

Overall, a net weighted balance of 16 per cent of services firms projected a quarter-on-quarter increase in fourth-quarter revenue, up from 9 per cent previously.

A net weighted balance of 10 per cent expect hiring activity to pick up - especially in retail, accommodation and F&B - against 3 per cent in the three months prior.

THE BUSINESS TIMES

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A version of this article appeared in the print edition of The Straits Times on October 30, 2021, with the headline Manufacturers less positive but services sector upbeat. Subscribe