Manufacturing, services firms in S’pore expect bleak second half

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Firms in Singapore’s manufacturing and services industries remain pessimistic about the business outlook for the second half of the year, amid the ongoing coronavirus pandemic and uncertain global trade and macroeconomic conditions.

Their downbeat sentiments were captured in separate surveys released yesterday by the Economic Development Board and the Department of Statistics.

Manufacturing firms are generally more optimistic than those in the services sector, with a net weighted balance of 7 per cent of firms predicting softer business prospects for the six months from July to December.

Contributing to their subdued outlook are United States-China trade tensions and the pandemic.

In comparison, a net weighted balance of 31 per cent of companies in the services sector predict business will get worse for the same period.

But despite the negative outlook, this was a bounce back from the record net weighted balance of 58 per cent of services firms which were downbeat on prospects from April to September.

Services firms expect employment levels to drop in the third quarter. Those in the accommodation industry expect to reduce hiring in the July to September period, in line with their outlook on operating receipts.

Across all services segments, business activity is expected to decline for the July to December period, compared with January to last month.

The accommodation and real estate industries are the most pessimistic.

Accommodation players expect a fall in demand due to low of tourist arrivals amid travel restrictions, while firms engaged in the leasing of commercial and office premises foresee downward pressure on rental rates due to weaker demand for such spaces.

Operating receipts are expected to decrease for July to September, compared with the previous three months.

Among manufacturers, despite the overall pessimism, there was a marked improvement from their outlook for April to September, where a net weighted balance of 56 per cent of firms anticipated a less favourable business situation.

A large proportion of manufacturing firms – a weighted 83 per cent – expect employment levels in the third quarter to remain similar to the second quarter, which also saw little change compared with the first three months of the year.

Overall, a net weighted balance of 7 per cent of firms plan to hire fewer workers in the next three months, with all clusters apart from the biomedical manufacturing cluster projecting a smaller workforce for the July to September period.

Across sectors, the transport engineering cluster is the most pessimistic about the business environment, while the electronics cluster is the most optimistic.

Within the electronics cluster itself, the semiconductors segment foresees resilient demand from the 5G market, cloud storage and data centres.

However, info-communications and consumer electronics, as well as other electronic modules and components segments, expect their orders to be negatively affected by the pandemic and US-China tensions.

A net weighted balance of 6 per cent of manufacturers also expect output to decrease in the third quarter, compared with the second quarter, with firms cautious about their production plans.

A weighted 64 per cent of manufacturing firms reported no limiting factors that would affect their ability to get export orders in the July to September period.

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