A majority of the firms polled (a weighted 76%) in the manufacturing sector by the Singapore Economic Development Board expect the business situation in 1H17 to remain similar to a quarter ago. A weighted 13% of manufacturers expect business conditions to improve while a weighted 11% foresee a slower business outlook. Overall, a net weighted balance* of 2% of manufacturers anticipate a favourable business situation for January to June 2017, compared to in Q416.
Within the manufacturing sector, the electronics cluster is the most optimistic about the next six months ending June 2017. A net weighted balance of 26% of firms anticipate an improved business situation ahead. This optimism is largely from the semiconductor segment, which expects the current improved market conditions to continue into 2017. In contrast, the infocomms & consumer electronics segment expects the business outlook to deteriorate compared to the preceding quarter.
In the precision engineering cluster, a net weighted balance of 2% of firms anticipate that business conditions will improve in the six months ahead, compared to Q416. Within this cluster, the machinery & systems segment foresees better business prospects, largely supported by the semiconductor-related equipment industry. On the other hand, the precision modules & components segment projects a less favourable business situation, in particular for metal stamping, plastic and rubber components.
In the transport engineering cluster, a net weighted balance of 4% of firms foresee that the business outlook will worsen from January to June 2017. This weaker outlook is largely driven by the marine & offshore engineering segment, which continues to be weighed down by lacklustre offshore exploration and drilling activities. On the other hand, the aerospace segment foresees a positive business outlook, in anticipation of more engine repair jobs.
A net weighted balance of 5% of firms in the chemical cluster anticipates a less favourable business situation in the first half of 2017. Within the cluster, the petroleum refining segment is concerned about the strength of refining margins following a seasonal uptick in Q416, while majority of the petrochemicals and specialties firms expect similar business conditions as a quarter ago. In contrast, the other chemicals segment is positive about business prospects, supported by the fragrances industry.
The general manufacturing industries cluster is the least upbeat about business prospects for the first half of 2017, with a net weighted balance of 29% of firms predicting a softer business outlook in the months ahead. The weak sentiment is broad-based, with all segments anticipating poorer business conditions ahead. In particular, firms in the miscellaneous industries segment expect lower demand for construction-related materials due to the slowdown in construction activities.
A net weighted balance of 4% of manufacturers expect a lower level of output in Q117 compared to Q416. While the electronics and precision engineering clusters forecast output increases, the rest of the clusters project declines:
- A net weighted balance of 18% of firms in the electronic cluster expect production to increase in Q117 as compared with a quarter ago.
- The semiconductor and other electronic modules & components segments expect higher output from January to March 2017 in anticipation of higher export orders and increased production capacities.
- In the precision engineering cluster, a net weighted balance of 10% of firms project higher output, largely supported by the semiconductor-related equipment industry.
- A net weighted balance of 17% of biomedical manufacturing firms expect a lower output level in Q117 compared to Q416.
When it comes to the service sector, a survey** has shown that a net weighted balance of 14% of related firms expect less favourable business conditions for 1H17 (January to June 2017) compared with 2H16 (July to December 2016). This is less optimistic compared to the net weighted balance of -8% registered in the previous quarter’s survey (October 2016 to March 2017) but is an improvement over the net weighted balance of -18% recorded for the same period last year.
Overall, a weighted 10% of firms are optimistic about the business conditions for 1H17 while a weighted 24% of firms foresee slower business. The majority of firms (a weighted 66%) anticipate the level of business activity to remain the same.
Within the services sector, all industries expect the level of business activity to deteriorate or remain the same for 1H17 as compared to 2H16. After experiencing brisk business during the year-end holidays, firms in the accommodation and food & beverage services industries expect slower business in 1H17.
A net weighted balance of 43% of the firms in the transport & storage industry expect the business situation to worsen in the six months ending June 2017. In particular, shipping lines foresee a slower global economy and weaker consumer demand to have a negative impact on the cargo volume in 1H17. Firms in the real estate industry are also less optimistic in their business outlook, registering a net weighted balance of -39%. Real estate developers continue to cite the government property cooling measures including the additional buyer’s stamp duty (ABSD) and total debt servicing ratio (TDSR) requirements as well as the uncertain economic outlook for the weak demand in the property market. For the retail trade industry, a net weighted balance of 22% of firms expect business prospects to deteriorate. In particular, retailers of wearing apparel & footwear, household appliances & furniture expect weaker consumer demand. A net weighted balance of 13% of firms in the services sector expect operating receipts to decrease for 1H17 as compared to 2H16. All industries within the services sector expect operating receipts to deteriorate or remain the same in Q117 compared to the preceding quarter.
In line with their negative business outlook, firms in the accommodation and food & beverage services industries expect the level of operating receipts to fall, with a net weighted balance of -48% and -21% respectively from January to March 2017 as compared to the preceding three months, which coincided with the year-end and festive holidays.
Firms in the transport & storage and real estate industries are also less optimistic in their operating receipts outlook for Q117 with a net weighted balance of -34% and -22 % respectively. In terms of employment, a net weighted balance of 4% of the firms in the services sector expects to reduce hiring for Q117. Within the services sector, firms in the accommodation, business services, and transport & storage industries expect to reduce hiring as they anticipate slower business activity. On the other hand, the retail trade industry expects hiring to increase, due mainly to supermarkets which anticipate higher sales during the Chinese New Year festive period***.
*A net weighted balance is used to indicate the likely overall direction of change of a particular activity or industry. Net weighted balance is calculated by taking the difference between the weighted percentages of “ups” and “downs”. A minus sign denotes a net downward trend.
**The Business Expectations Survey for the services sector is conducted quarterly, one month before the reference quarter, by the Singapore Department of Statistics. The Q117 survey was conducted from December 2016 to mid-January 2017. It is a survey aimed at obtaining the business outlook for the immediate future of firms in the services sector. The survey covers some 1,500 enterprises in wholesale trade, retail trade, transport & storage services, accommodation, food & beverage services, information & communications services, financial & insurance services, real estate, business services (excluding real estate) and recreation, community & personal services.
Respondents are asked about their expectations of the business situation in the next six months as well as operating receipts and employment in the next three months. Their views are expressed in terms of directional change (i.e., “up”, “same” or “down”). Enterprises’ responses are then weighted and aggregated to derive the weighted percentages for “up”, “same” or “down” at industry and overall sectorial level for each question. Employment size is used as the weighting variable at both the enterprise and industry level for the employment forecast. For the general business outlook and operating receipts forecast, operating receipts and value added are used as weights at the enterprise level and industry level respectively.
***Chinese New Year began on January 28 in 2017 and continues till February 11, 2017. Celebrations typically begin about two weeks before the first day of the lunar new year.
