Singapore manufacturers turn gloomy on outlook for first time since 2020

A net weighted balance of 8 per cent of manufacturers were gloomy about the business outlook for the next six months. PHOTO: ST FILE

SINGAPORE - Singapore manufacturers turned negative on business prospects for the first time since 2020, though firms in the services sector stayed positive as global travel resumed and Covid-19 curbs lifted, according to separate surveys released on Friday (July 29).

For manufacturers, "global uncertainties have increased amidst supply chain challenges, operating cost pressures, Covid measures in China and the ongoing Russia-Ukraine conflict, thereby potentially weighing on external demand," the Economic Development Board (EDB) said in its quarterly report.

A net weighted balance of 8 per cent of manufacturers were gloomy about the business outlook for the next six months, or July to December. This was the first negative reading since the third quarter of 2020.

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

All clusters within the manufacturing sector except transport engineering and precision engineering were bearish about the second half of the year.

The electronics cluster was the most pessimistic, with a net weighted balance of 21 per cent of firms expecting a dampened half-year ahead.

Within the cluster, firms in the semiconductors and computer peripherals and data storage segments are concerned over the continuing supply chain disruptions and a softening in consumer demand from the personal computer and smartphone markets, even as cloud, automotive and industrial end markets remain resilient.

The biomedical manufacturing cluster also expects a less favourable business situation until December.

This negative sentiment was shared by both the pharmaceuticals and medical technology segments where firms expect supply chain constraints and rising costs to weigh on their businesses.

In the general manufacturing cluster, a net weighted balance of 11 per cent of firms have a weaker business outlook for the period of July to December.

Firms in both the food, beverages and tobacco and printing segments were concerned about higher operating costs, on the back of elevated energy and raw materials costs.

In contrast, the transport engineering cluster was the most optimistic, with a net weighted 48 per cent of firms expecting better business conditions.

This positive sentiment was driven by the aerospace segment, which expects higher demand for aircraft maintenance, repair and overhaul work as global air travel recovers.

Firms in the marine and offshore engineering segment also anticipate an increase in global oil and gas activities, on the back of higher crude oil prices.

Despite a weaker business outlook, a net weighted balance of 17 per cent of manufacturers saw output rising in the third quarter of 2022, compared to the prior quarter.

Hiring was also expected to increase for all clusters, particularly for transport engineering and electronics.

The services sector meanwhile saw a net weighted balance of 15 per cent of firms predicting more favourable conditions in the next six months, according to the survey by the Department of Statistics (SingStat).

The accommodation and food and beverage industries were the most bullish. This was due to the greater influx of tourists into Singapore with the resumption of global travel and higher business volume for food and beverage providers with the lifting of restrictions on group sizes for dining in.

The recreation, community and personal services industry expects business to pick up in second half of 2022.

Firms operating sports facilities were optimistic as they can host events with larger capacities with the easing of safe management measures. 

Similarly, amusement and theme parks also expect higher footfall as more tourists visit.

Retailers were looking forward to more sales with the year-end holidays and festive season coming.

As a whole, the services industries expect an increase in hiring activity for July to September.

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