Singapore services sector lacks optimism despite manufacturers expecting better business conditions

Singapore services sector lacks optimism despite manufacturers expecting better business conditions

Companies in Singapore’s services sector are less optimistic about future business conditions in the first half of this year whereas those in the manufacturing sector are more optimistic.

These outlooks are reported by the two surveys released by the Singapore Department of Statistics (SingStat) and the Economic Development Board of Singapore (EDB) on Friday (31 Jan).

According to the SingStat survey, a net weighted balance of 2 per cent of companies in the services sector expect a less favourable business outlook from January to June this year.

Although this outlook is less vibrant than the outlook for half year from October 2019 to March 2020 (1 per cent net weighted balance), it is at least an improvement from last year’s results at -4 per cent net weighted balance.

Service sector firms that predict a more uplifting business conditions in H1 2020 are those in recreation, community and personal services, finance and insurance, and information and communication.

Contrasting that, companies in the industries such as food and beverage, accommodation and retail trade foresee a less upbeat business outlook, SingStat reported.

In Q1 of 2020, operating receipts in the overall services sector is expected to decline, compared with Q4 of last year.

Aside from the general manufacturing industries cluster, the manufacturing sector clusters are foresee an improved business outlook in the first six months of 2020, as captured by EDB survey.

Business outlook distinctions among manufacturers can be seen in three ways. A weighted 7 per cent are pessimistic, a weighted 19 per cent predict an improvement whereas a weighted 74 per cent expect business conditions to remain as they are.

On the whole, a net weighted balance of 12 per cent of Singapore manufacturers foresee business situation improving from January to June this year, compared to Q4 of 2019.

Especially in the electronics cluster, outlook turned positive. A net weighted balance of 23 per cent of companies anticipate improvement in operating environment six months from now, compared to the last quarter. This shift in outlook is due to the expectations that the US-China trade tension will not worsen and the introduction of 5G technology which will lift up the semiconductor sector, EDB reported.

As for the transport engineering cluster, a net weighted balance of 15 per cent of companies feel optimistic.

Least optimism is exhibited by the general manufacturing industries cluster, with a net weighted balance of 4 per cent of companies have an unfavourable outlook for the next six months.

In the general manufacturing cluster, the printing segment expects higher demand for print jobs as digital adoption will also increase. On the other hand, the food, beverages & tobacco segment anticipates seasonally weaker orders in Q1 this year, EDB reported.

Output in the precision engineering cluster is the most optimistic among manufacturers. Higher level output in Q1 is expected by a net weighted balance of 38 per cent of precision engineering firms, in comparison to the last quarter. According to EDB, this positive expectation is fuelled by expectations of higher production of semiconductor-related equipment in the machinery and systems segment. This is also driven by the recovery in the world semiconductor demand.

Compared to the last quarter, two clusters of biomedical manufacturing and general manufacturing industries expect a fell in their production in Q1 of 2019.

As for employment, most manufacturing firms foresee Q1 employment levels to not deviate too much from the levels of the previous quarter.

On the whole, in the coming three months, a net weighted balance of 3 per cent of Singapore manufacturing firms are looking to hire less workers.

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