Manufacturers extremely downbeat about growth prospects in Q2

New orders and inventory levels are expected to decline.

Companies in the manufacturing sector remained extremely downbeat about their growth prospects for the second quarter, with both new orders and inventory levels expected to contract in the coming months.

The Singapore Commercial Credit Bureau (SCCB)’s latest quarterly Business Optimism Index (BOI) study showed that while the overall BOI rebounded marginally in Q2, manufacturers bucked the uptrend and retained their pessimistic outlook.

The manufacturers are anticipating new orders and inventory levels to decline, registering -8.70 percentage points and -17.39 percentage points respectively.

Hiring sentiments within the sector are expected to remain unchanged at 0 percentage points. On a y-o-y basis, all 5 business indicators have moderated downwards.

“The pessimistic outlook is attributed mainly to a pullback in overall production activity. According to the Singapore Institute of Purchasing & Materials Management (SIPMM), Singapore’s Purchasing Managers’ Index contracted further to a reading of 49.7 points in February this year,” the report stated.

Analysts noted that the manufacturing sector's performance has been disappointing so far this year, with industrial production contracting 1.2% from January to February.

“Manufacturing continues to be disproportionately hurt by economic restructuring efforts and lackluster external demand, particularly from China and Japan. Manufacturing continues to struggle amid tight labor market conditions and divergent growth patterns in major export destinations,” stated a report from Bank of America Merrill Lynch.