Singapore's manufacturing sentiment sours for H1 2019

Manufacturers are less optimistic amidst weakening demand.

Singapore’s manufacturers are less optimistic about their business prospects for the first six months of 2019 with a mere 5% of businesses expecting market conditions to improve amidst softening demand and global trade uncertainties, according to the latest report by the Economic Development Board (EDB).

Also read: Business optimism moderates to 7.19 ppt for Q1 2019

Three quarters or 76% of firms in the manufacturing sector expect business conditions in H1 2019 to remain similar to Q4 2018, whilst a net weighted 19% hold a weaker business outlook.

The electronics, general manufacturing and precision engineering cluster were reported to be the least optimistic, as they forecast weaker orders on the back of declining demand for semiconductors and semiconductor-related equipment. “Within the general manufacturing industries cluster, firms expect output to be seasonally lower in Q1 of 2019,” EDB said.

Also read: Singapore manufacturing inched up 2.7% in December 2018

In contrast, the biomedical manufacturing cluster was found to be the most optimistic, with a net weighted balance of 35% of firms projecting a higher level of production on Q1 2019 compared to a year ago. The pharmaceuticals segment in particular forecasted higher production in active pharmaceutical ingredients, whilst the medical technology segments expect an increase in output to meet export demand for medical devices in Q1.

Meanwhile in the transport engineering cluster, firms expect higher level of activity in Q1, on the back of a projected increase in ship repairing work in the marine & offshore engineering segment, as well as aircraft engine repairs for commercial airlines in the aerospace segment. However, EDB noted that offshore rig orders remain subdued.

Also read: Singapore non-oil domestic exports dropped 8.5% in December 2018

“A weighted 22% of firms also indicated price competition from overseas competitors and political or economic conditions abroad as the top two limiting factors that could affect their export orders,” EDB added.

On the employment front, a net weighted balance of 2% of manufacturers plan to hire fewer workers in Q1 compared to Q4 2018, with firms in the electronics, precision engineering and general manufacturing industries expecting to hire the fewest, if any, during the quarter.