SINGAPORE: Manufacturing and services firms in Singapore have become less upbeat about business prospects for the second half of 2019, although there are certain segments within these sectors that are more optimistic and are still looking to ramp up hiring, two surveys showed on Wednesday (Jul 31).
The surveys, which cover business expectations for July till December 2019, were released by the Economic Development Board (EDB) for the manufacturing sector and the Department of Statistics (SingStat) for services.
EDB surveyed 422 manufacturing establishments, of which 94 per cent responded; while SingStat's survey covered about 1,500 services firms.
Local manufacturers expect business conditions to stay soft over the upcoming six months as trade tensions persist, EDB said.
Apart from the prolonged trade spat between the United States and China, the sector, which accounts for about one-fifth of the economy, has also been feeling the heat from slowing global growth and a global electronics cycle downturn.
Flash estimates released earlier this month showed the manufacturing sector moving deeper into contraction on a year-on-year basis in the second quarter. On the back of that, the Singapore economy slowed to a decade-low 0.1 per cent growth for the second quarter.
EDB’s survey on Wednesday showed a net weighted balance of 11 per cent of manufacturers predicting a less favourable business situation for the six months ahead, indicating a worsening of sentiment compared to the same period last year where a net weighted balance of 7 per cent expected an improved business outlook.
The net weighted balance is commonly used to reflect business sentiments.
Within the sector, firms in the chemicals, electronics and precision engineering clusters are those that indicated souring sentiments.
The chemicals cluster is concerned about declining refining margins and weaker demand from the region, particularly China, said EDB.
For the electronics and precision engineering cluster, subdued demand for semiconductors and semiconductor-related equipment, as well as uncertainties arising from the US-China trade conflict that has broadened to the global technology sector, contributed to the weaker outlook.
By contrast, the biomedical manufacturing cluster is the most optimistic, as the pharmaceuticals segment anticipates higher export demand for biological products.
Likewise, the survey by SingStat showed moderating business expectations among services firms here, with a net weighted balance of 2 per cent of firms predicting a more favourable business outlook.
This is weaker than the 9 per cent recorded for the same period last year, as well as the 4 per cent seen in the previous quarter, according to the latest survey.
Those that are least optimistic include the retail trade, wholesale trade, and financial and insurance industries.
“Wholesalers, as well as banks and finance companies, expect the ongoing trade conflict between US and China to have a negative impact on their businesses,” SingStat said.
On the other hand, firms in the accommodation, and food and beverages services industries are more hopeful with the year-end festive season round the corner. Hoteliers also expect better business due to the Formula One night race in September.
For the information and communications industry, firms engaged in computer programming and consultancy services, and web portal services also foresee favourable business conditions ahead.
Within the transport and storage industry, shipping lines and air transport firms anticipate higher cargo and passenger volume in the coming months, SingStat said.
Such varying outlooks within the two sectors have also translated into differing hiring plans among businesses.
For instance, firms in the general manufacturing industries and precision engineering clusters, which have been roiled by trade tensions and other global uncertainties, are projecting a smaller workforce in the next three months.
By contrast, the biomedical manufacturing and transport engineering clusters anticipate increased hiring for the same period, according to EDB.
Within services, firms in the food and beverage and accommodation industries, which expect higher level of operating receipts in the third quarter, are looking at increasing hiring activity.
The real estate industry also foresees more hiring for the next three months, as firms engaged in the management of residential, commercial and industrial properties expect an increase in demand for their services, according to SingStat.
On the other hand, businesses in retail trade plan to hire less as they anticipate lower turnover for the third quarter.
Amid slowing growth, economists have cautioned that the labour market could feel some impact, with more retrenchments and fewer job vacancies ahead.
Preliminary figures released by the Ministry of Manpower last week showed the unemployment rate for Singaporeans continuing to rise in the second quarter as the pace of employment growth slowed.