Manufacturing and services downbeat about first half

Sentiment was especially poor among the electronics industry, with a net weighted balance of 45 per cent of firms anticipating conditions to worsen in January to June this year compared to October to December 2018.
Sentiment was especially poor among the electronics industry, with a net weighted balance of 45 per cent of firms anticipating conditions to worsen in January to June this year compared to October to December 2018.PHOTO: ST FILE

Surveys by EDB and SingStat tally with private research on local business mood

Manufacturing and services firms are more pessimistic about their prospects for the first half of this year, two separate government surveys have shown.

Both confirm private research on business sentiment for the year.

Overall, manufacturers predict that business conditions will worsen from January to June this year, data released yesterday by the Economic Development Board (EDB) showed.

A net-weighted balance of 14 per cent of manufacturers are anticipating a less favourable business situation, a much gloomier outcome than in the previous quarterly survey when the figure was just 1 per cent.

A separate survey by the Department of Statistics (SingStat) found that in the services sector, a net-weighted balance of 4 per cent of firms expected business conditions to worsen in the next six months.

This is the first time since the second quarter of 2017 that overall business sentiment among services firms has slipped into pessimism.

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

Both surveys found mostly negative sentiment in different industries in both sectors, though there were some bright sparks in some.

Sentiment was especially poor among the electronics industry within manufacturing. A net-weighted balance of 45 per cent of firms took a downbeat view of January to June this year, compared with the fourth quarter of 2018.

Precision-engineering companies which had mounting worries over global trade tensions foresaw weaker orders amid a softening demand for semiconductors and related equipment.

On balance, 24 per cent of precision-engineering firms were less optimistic about the first half of this year relative to the last quarter of 2018.

However, EDB's survey found that firms in the biomedical manufacturing and the transport-engineering industries were bullish about their prospects as demand for medical technology and marine and offshore engineering are expected to remain robust.

Overall, a net-weighted balance of 2 per cent of manufacturers expected output to decrease in the first quarter of this year. A weighted 84 per cent expected hiring to remain at a similar level to the previous quarter.

Dr Tan Khay Boon, senior lecturer at SIM Global Education, said the gloomy outlook among manufacturers was due to global uncertainties, such as trade tensions and a disorderly Brexit. These, he added, negatively impacted on exports that the sector depends on.

Within the services sector, the downbeat included those in wholesale trade, real estate and financial and insurance industries, while food and beverage services and infocomms services remained upbeat.

In particular, the wholesale trade, and the financial and insurance industry, were pessimistic in the light of the ongoing United States-China trade conflict, said SingStat.

The results confirm the gloomy outlook for all firms - not just in manufacturing and services - for the whole of this year that was apparent in the Singapore Business Federation's (SBF) annual National Business Survey of more than 700 firms released last month.

It showed that around 84 per cent of firms believed that the business environment would remain the same or become worse this year, up from 66 per cent for last year.

SBF chief executive Ho Meng Kit, speaking at a seminar on the business outlook for 2019 yesterday, said negative business sentiments would make it harder for firms to develop their workforce and implement innovations due to their limited time and financial resources.

He added that only 12 per cent of all firms had invested in better training for staff in the past year.

A version of this article appeared in the print edition of The Straits Times on February 01, 2019, with the headline 'Manufacturing and services downbeat about first half'. Print Edition | Subscribe