Singapore businesses turn positive again on six-month outlook: surveys

• Jan 29, 2021

THE mood among Singapore businesses has turned positive again, with more companies now expecting business prospects to improve than to worsen.

Headline outlook for the first half of 2021 was a turnaround from the gloom seen last year, according to official quarterly surveys out on Friday.

But the mood under the hood was patchy, with optimism more muted in the services sector, which was harder-hit by the Covid-19 pandemic.

A net weighted balance of 32 per cent of manufacturers expect the business situation to be better than the last quarter of 2020, said the Economic Development Board (EDB), citing a rosier global economic climate on the roll-out of Covid-19 vaccines.

This was a rebound from the recent trough of -56 per cent in Q1 2020. It also marked the highest level of manufacturing optimism since Q1 2010, when Singapore was recovering from the global financial crisis.

Meanwhile, Department of Statistics (SingStat) data showed a net weighted balance of 7 per cent of services firms expecting conditions to pick up from the second half of 2020. This was the first positive net weighted balance for the sector after four straight quarters of negativity, with the low at -58 per cent in Q1 2020.

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

On the manpower front, a net weighted balance of 4 per cent of manufacturers plan to hire more workers in the next three months. A weighted 86 per cent expect a similar employment level to Q4 2020.

In services, the labour forecast was flat quarter on quarter. A weighted 78 per cent of employers expected unchanged headcount, while the shares of firms expecting to hire and to fire offset each other.

The latest outlook came as Singapore on Thursday reported resident unemployment of 4.4 per cent in December 2020, with an estimated 26,570 retrenchments for the full year.

People’s Action Party MP Patrick Tay (Pioneer SMC), who is also assistant secretary-general of the National Trades Union Congress, said in a Facebook post that both sets of data show “positive signs in the overall economy and labour market”.

“However, the global fight against the pandemic is still stifling the opening up of travel and borders,” he added. “I am particularly concerned with the uncertain, uneven, and unfair impact that this ongoing economic recovery will have on different segments of workers and industries/sectors.”

Biomedical manufacturers were the most optimistic, with a net weighted balance of 46 per cent positive on the six-month outlook. Drugmakers expected fewer supply-chain disruptions and improved market conditions, while medical technology companies looked forward to more orders for both Covid-19 and non-Covid-19 medical devices.

The precision engineering and electronics clusters, which also notched strong growth in 2020, expect the momentum to carry over into the new year as well.

Net weighted balances of 45 per cent of precision engineering manufacturers and 37 per cent of electronics firms pointed to improved business conditions.

That’s on the back of robust demand for semiconductor-related equipment in precision engineering, the EDB said, as well as the boost to semiconductors and other electronic modules and parts from 5G markets.

Businesses in the transport engineering cluster, which has been battered by the global aviation shutdown, also hope for better days ahead.

A net weighted balance of 24 per cent of firms expect better business prospects, as manufacturers in the land segment tip higher export demand for automotive parts and the aerospace segment looks to “a modest pick-up in demand for aircraft engine repair” as pandemic-related travel curbs ease.

But the oil and gas slump is still weighing on the marine and offshore engineering segment, and net sentiment in this area stayed negative as a result.

Meanwhile, chemicals companies saw a net weighted balance of 6 per cent positive about the January-to-June period, with only the petrochemicals segment reporting a negative net weighted balance of 1 per cent. Overall output in this cluster for the first quarter of 2021 is expected to rise among a net weighted balance of 4 per cent.

General manufacturers were the most cautious, with a net weighted balance of 3 per cent optimistic about their prospects. Still, the cluster – which expects output to be flat in January to March, against the quarter prior – was buoyed by companies in the miscellaneous segment, on the hope of higher construction-related material production as domestic construction activities continue to pick up.

Unlike the broad-based hopefulness among manufacturers, not all services industries reported positive net weighted balances on the six-month outlook.

The finance and insurance industry was the most upbeat, with a net weighted balance of 18 per cent expecting better business conditions.

Retail trade firms (+17 per cent) and food and beverage services providers (+14 per cent) were also cheered by the easing of Covid-19 safety restrictions in the final phase of Singapore’s reopening, according to the SingStat analysis.

The information and communications industry recorded a net weighted balance of 12 per cent, spurred by software publishers and Web portal service providers.

This was the same level of optimism as the recreation, community and personal services industry (+12 per cent), which includes healthcare providers.

Wholesale traders reported a positive net weighted balance of 11 per cent, followed by transport and storage services providers, at 8 per cent.

But the services sector was dragged down by continued despondency in the accommodation industry, where the net weighted balance was -42 per cent as “hoteliers expect slow pick-up in demand due to global travel restrictions”, SingStat said.

Similarly, a net weighted balance of 16 per cent of real estate industry players expect business conditions to weaken in the next six months, especially as commercial landlords think that telecommuting will continue to depress demand for office space.

The net weighted balance in professional, administrative and support services was -9 per cent, on fear of fewer architectural, engineering and security contracts.

Overall, a net weighted balance of 5 per cent of services firms expect operating receipts to increase from January to March 2021, compared with the last three months of 2020.

On the manpower front, a net weighted balance of 4 per cent of manufacturers plan to hire more workers in the next three months, while most businesses – a weighted 86 per cent – expect a similar employment level to the fourth quarter of 2020.

In services, the labour forecast was flat on the quarter before, with a net weighted balance of zero. That’s as a weighted 78 per cent of employers pegged a flat headcount, while the shares of firms expecting to hire and to fire offset each other.

The latest outlook came as Singapore on Thursday reported resident unemployment of 4.4 per cent in December 2020, with an estimated 26,570 retrenchments for the full year.

Source: https://www.businesstimes.com.sg/government-economy/singapore-businesses-turn-positive-again-on-six-month-outlook-surveys