Manufacturers more cautious as costs rise: Survey

While Singapore manufacturers turned more cautious in their business outlook amid the fallout from the war in Ukraine, firms in the services sector stayed more upbeat with the expected easing of Covid-19 restrictions.

These sentiments were reflected in separate surveys, released yesterday by the Economic Development Board (EDB) for the manufacturing sector and the Department of Statistics (SingStat) for the services sector.

EDB said the ongoing Russia-Ukraine conflict is adding to supply chain and inflationary pressures, resulting in higher cost of operations for manufacturers.

A net weighted balance of 2 per cent of manufacturing firms expect better business conditions from April to September, compared with the first quarter of this year. This is a drop from the 8 per cent seen in the previous poll in January.

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

As for the services sector, a net weighted balance of 15 per cent of firms are upbeat about business conditions in the next six months - more than in the manufacturing sector. This is also slightly higher than the 14 per cent in the last services survey.

SingStat noted that the poll was conducted from last month to mid-April, during which the Government announced major relaxation of domestic and travel restrictions.

Within the manufacturing sector, transport engineering firms are the most optimistic, with a net weighted 33 per cent of firms expecting an improved operating environment.

The aerospace segment, in particular, expects higher demand for aircraft maintenance, repair and overhaul work as air travel volumes pick up amid subsiding fears over Covid-19.

Firms in the marine and offshore engineering segment also anticipate an increase in oil and gas activities, as the Russia-Ukraine conflict drives up crude prices.

For the precision engineering cluster, a net weighted balance of 15 per cent of firms expect business conditions to improve, with strong global demand for chips to continue supporting capital investments by semiconductor manufacturers.

The biomedical segment is the least upbeat, mainly due to pharmaceutical firms expecting material shortages and rising costs to weigh on business.

In the chemicals cluster, a net weighted balance of 13 per cent of firms foresee a worsening business situation, especially the petrochemicals segment, in view of excess supply and weakening margins on the back of escalating feedstock costs amid the war in Ukraine.

In general manufacturing, firms in both the food, beverages and tobacco and the printing segments are concerned about the higher costs of energy and raw materials.

Conversely, the miscellaneous industry segment, which includes firms dealing with construction-related materials, expects improved orders in anticipation of increased construction activities with the easing of Covid-19 restrictions.

For the services sector, all industries, except for retail trade, expect business conditions to improve.

Transportation and storage is the most hopeful industry, particularly air transport firms, in view of the establishment of the Vaccinated Travel Framework, which is expected to boost air travel demand.

Wholesale trade firms are also optimistic, with wholesalers of computers foreseeing higher demand for the devices and peripheral equipment as businesses continue to digitalise their operations.

Finance and insurance firms are also positive in their outlook. Firms engaged in credit card and payment processing services foresee more consumer spending amid the global economic recovery.

The recreation, community and personal services industry is also optimistic, with operators of sports facilities expecting to organise more events and with larger capacities.

Healthcare providers, meanwhile, expect increased demand for their services as non-urgent elective surgery is able to resume.

Conversely, retailers expect slower business compared with the previous quarter, which coincided with the year-end holidays and festive period.