SINGAPORE - Business optimism has receded among firms in the manufacturing and service sectors amid new Covid-19 variants and supply chain pressures.
A net weighted balance of 8 per cent of manufacturers expect better business conditions in the first six months of this year than in the fourth quarter of 2021, according to a survey from the Economic Development Board (EDB) on Monday (Jan 31).
This is a drop from the 16 per cent seen in the previous poll in October.
Similarly, a net weighted balance of 14 per cent of firms in the services sector are more optimistic, less than 19 per cent in the previous survey when the six-month outlook coincided with the year-end festive period, said 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.
OCBC chief economist Selena Ling said: “The optimism in the services sector appears to have taken a step back for the first half of 2022, partly attributable to the Omicron outbreak which may have contributed to some tightening of restrictions for many regional economies including the suspension of vaccinated travel lanes for Singapore.
“The most bearish is the real estate industry which is likely due to the recent property cooling measures introduced in December, coupled with the expected rising interest rate environment.”
But she noted that hiring prospects remain positive for the first quarter across the services sector.
For manufacturing, the main drag was electronics, Ms Ling noted.
“Even though semiconductor demand remains healthy, we are approaching a slower season, and especially softer demand for electronic modules and components, with China’s ongoing slowdown likely to impact export orders. That said the manufacturing employment gauge is more positive at 12 per cent, which is triple that a year ago,” she said.
Among manufacturers, transport engineering was the most hopeful. Within this cluster, aerospace firms expect higher demand for aircraft maintenance, repair and overhaul work with more countries easing international travel restrictions, EDB said.
Land and marine and offshore engineering firms are also optimistic amid recovery in the global automotive and oil and gas markets despite supply chain challenges.
Biomedical manufacturing firms are also positive in their outlook, especially makers of medical devices who expect continued strong export demand, both related and unrelated to the pandemic.
In the precision engineering cluster, the semiconductor equipment industry expects strong global chip demand to drive capital investments. But many firms, particularly those in precision modules and components, are concerend about longer shipment lead time and rising costs due to supply chain bottlenecks, EDB said.
The key electronics cluster was the least upbeat with a net weighted balance of just 4 per cent of firms expecting conditions to improve.
Semiconductor makers expect demand to remain strong, though seasonally lower than that in the previous quarter. But firms in the other electronics modules and components segment are concerned about softer export orders from China.
In the services sector, the information and communications industry is upbeat, especially firms engaged in computer programming and consultancy services as they foresee more demand from clients to digitalise business operations, SingStat said.