Business Expectations of the Manufacturing Sector (business sentiments for July – December 2013)31 July 2013
I Business Sentiments for July – December 2013
- In the manufacturing sector, a weighted 13 per cent of manufacturers expect business conditions to improve while a weighted 5 per cent foresee deterioration in the second half of 2013. Overall, a net weighted balance of 8 per cent of manufacturers anticipate a more favorable business situation in the next six months ending December 2013 compared to the second quarter of 2013. Despite the positive sentiment, the manufacturing sector continues to be concerned about the global macro-economic environment, in particular the US, EU and China.
- Within the manufacturing sector, the general manufacturing industries cluster is the most optimistic. A net weighted balance of 17 per cent of firms expect business situation to improve in the second half of 2013 compared to a quarter ago. The food, beverages and tobacco segment anticipates higher festive orders in the next six months, while the miscellaneous industries segment expects continued support from domestic construction activities.
- The precision engineering and electronic clusters also anticipate better business conditions in the six months ahead ending December 2013. In the precision engineering cluster, a net weighted balance of 11 per cent of firms expect more orders ahead. This positive sentiment is noted in the semiconductor related equipment and machine tools industries within the machinery & systems segment. In the electronics cluster, a net weighted 8 per cent of firms expect better business prospects in the second half of 2013. Within the cluster, the semiconductor segment is the most upbeat, as it expects a seasonal uptick in orders over the next six months compared to the second quarter of 2013.
II Output Forecast for July – September 2013
- Compared to the second quarter of 2013, a net weighted balance of 5 per cent of manufacturers expect output to increase in the third quarter of 2013. All except the biomedical manufacturing cluster foresee higher production in the next three months.
- The general manufacturing industries cluster is the most bullish with a net weighted balance of 17 per cent of firms expecting a higher output level in the third quarter of 2013 compared to a quarter ago. In particular, the food, beverage & tobacco segment projects higher output, in anticipation of the upcoming festive celebrations (e.g. Hari Raya and Mid-Autumn festival). In the chemicals cluster, a net weighted 15 per cent of firms foresee an increase in production, on account of higher petrochemical capacity and sustained demand for other chemical products (e.g. perfumes & fragrances) in the region. In the transport engineering cluster, a net weighted 8 per cent of firms project a higher level of activity in the third quarter of 2013 compared to the preceding quarter. This optimism is led by the marine & offshore engineering and land segments. The former expects to record a higher percentage of work done in the yards and the latter foresees more orders for land transport equipment.
- In contrast, a net weighted 9 per cent of the biomedical manufacturing firms forecast a lower level of output in the third quarter of 2013 compared to the second quarter of 2013. A lower output of active pharmaceutical ingredients is planned for the third quarter of 2013.
III Employment Forecast for July – September 2013
- Employment prospects in the manufacturing sector for the third quarter of 2013 are expected to remain positive. A weighted 97 per cent of manufacturers expect employment level in the third quarter of 2013 to increase or remain similar, compared to the second quarter of 2013. The general manufacturing industries and the biomedical manufacturing clusters are the most optimistic about employment opportunities in the three months ahead.
IV Factors Affecting Export Orders for July – September 2013
- A weighted 54 per cent of firms in the manufacturing sector reported no limiting factors that will affect their ability to obtain direct export orders in the third quarter of 2013. The weighted 40 per cent of firms that indicated export constraints, cited price competition from overseas competitors and economic & political conditions abroad as the most important limiting factors.
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The Survey of Business Expectations of the Manufacturing Sector for the third quarter of 2013 was conducted between June 2013 and July 2013 by the Economic Development Board. Out of a total of 429 manufacturing establishments surveyed, 96 per cent responded. These establishments were asked to indicate their expectation of general business conditions and other indicators such as output and employment. Their views are expressed in terms of directional change (i.e. “up”, “same” or “down). Individual responses provided by the establishments are weighted by their contribution to employment and value added. These responses are then aggregated at cluster, sub-cluster and overall manufacturing level, and presented in terms of weighted percentages. The net weighted balance is commonly used to reflect the direction and extent of the business sentiments. It is the difference between the weighted percentage of 'up' responses and the weighted percentage of 'down' responses. For example, if weighted responses for overall manufacturing output yields a net weighted balance of +30 per cent, the plus sign before the percentage figure indicates a positive balance or net upward movement, and not a 30 per cent increase in output. Similarly, a minus sign before the percentage indicates a downward trend and not a decline by that amount.
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Business expectations for the next three and six months by industry.
31 July 2013