SINGAPORE – Most businesses in the manufacturing and services sectors remain optimistic despite geopolitical and economic uncertainties, according to separate quarterly survey reports released on Tuesday.

A net weighted balance of 7 per cent of manufacturing firms anticipate an improved business situation for the period October 2023 to March 2024, compared with the third quarter of 2023, the Economic Development Board said in its latest report.

For service companies, a net weighted balance of 9 per cent of firms are expecting a more favourable business outlook, based on a similar survey by the Department of Statistics (SingStat).

The net weighted balance is the difference between the weighted shares of positive and negative responses, with a positive figure indicating more optimism than pessimism.

The transport engineering cluster remains the most optimistic among manufacturing firms, with a net weighted 35 per cent of firms expecting a favourable business environment.

This positive sentiment is led by the aerospace segments, which saw strong global air-travel demand, and more orders from the oil and gas and renewable energy industries in the marine and offshore engineering segments.

A net weighted balance of 23 per cent of firms in the electronics cluster predict improved business conditions, attributing their expectations to the semiconductors segment, where ongoing adjustments in customers’ inventories are expected to lead to a gradual demand recovery.

In the general manufacturing cluster, a net weighted balance of 6 per cent of firms project better business prospects for the next six months.

Firms supporting the construction sector in the miscellaneous segment expect higher demand for construction-related products on the back of a high volume of construction activities.

The professional services industry – which includes accounting firms, head offices and management consultancy firms – is also optimistic, with those engaged in engineering design and consultancy activities expecting an increase in the number of projects.

Health services attributed their optimism to the expansion of healthcare facilities and services and expected increase in medical tourists. Childcare centres were also positive, citing increased demand for childcare services.

Firms engaged in information services activities cite strong demand for data and cloud services as reasons for their positive sentiments.

Year-end festivities expected to be a boost for some

In the services sector, all industries expressed positive sentiments overall on their business conditions for the October 2023 to March 2024 period, mainly expecting an increase in sales due to the upcoming Christmas, New Year and Chinese New Year festive periods. Eighteen per cent of firms in the sector are upbeat about the business conditions, while 9 per cent of firms foresee deteriorating business conditions.

Hoteliers believe Singapore will continue to be a popular travel destination and expect an increase in the number of tourists during the year-end festive period, which they hope will bode well for the accommodation industry.

Likewise, firms in the retail trade, tobacco and food-and-beverage services industries are positive in their outlook due to the same expectations.

Employment outlook

Firms within the accommodation industry also expect to increase hiring in tandem with the projected increase in tourist arrivals.

In fact, most industries expect to increase their hiring activities for the October to December 2023 period, with a net weighted balance of 12 per cent.

For example, real estate firms expect employment levels to increase in line with their positive revenue outlook for the fourth quarter of 2023. Within this industry, firms providing real estate management and maintenance services expect to secure more contracts.

In terms of hiring, a majority of firms (a weighted 81 per cent) in the manufacturing sector expect employment levels in the fourth quarter of 2023 to remain similar to those of the third quarter of 2023.

Among the manufacturing clusters, the transport engineering cluster is the most optimistic in its employment outlook, with the precision engineering and biomedical manufacturing clusters being the least optimistic.

Some affected by regional and global demand, costs

Meanwhile, the precision engineering, biomedical manufacturing and chemicals clusters are pessimistic about business conditions for the next six months.

A net weighted balance of 5 per cent of firms in the precision engineering cluster expect a weaker business environment.

In particular, the precision modules and components segment continues to be negatively affected by the uncertainties in macroeconomic conditions as well as the slowdown in global electronics demand. Others, such as firms in the printing segment, are concerned about higher operating costs and the decline in print jobs due to digitalisation.

Meanwhile, a net weighted balance of 13 per cent of firms in the chemicals cluster foresee business conditions to worsen in the coming months. Firms in the specialities and petroleum segments expressed concerns over weak regional demand and high domestic operating costs.

A net weighted balance of 13 per cent of firms in the biomedical manufacturing cluster expect lacklustre business conditions to continue till March 2024.

The less optimistic outlook is largely supported by firms in the medical technology segment, which expect a lower demand for life science instruments and consumables, given the softer macroeconomic outlook and excess inventory held by customers.