I Business Sentiments for July - December 2009

1. Business conditions in the manufacturing sector are expected to improve for the second half of 2009. The latest survey shows a weighted 16 per cent of manufacturers predicting an improvement and a weighted 18 per cent expecting deterioration. This sentiment is better than that reported in the survey conducted a quarter ago¹. Overall, a net weighted balance of 2 per cent of manufacturers expect a less favorable business situation for the period July to December 2009 compared to the second quarter of 2009.

2. Within the manufacturing sector, the electronics cluster is the most optimistic for the second half of 2009, with a net weighted balance of 24 per cent of firms expecting business conditions to improve. This optimism is broad-based as most of the segments foresee higher orders and exports in the next few months.

3. The chemicals and transport engineering clusters are the least upbeat about business conditions in the second half of 2009 compared to the second quarter of 2009. In the chemicals cluster, the petroleum and petrochemical segments anticipate industry margins to come under pressure from the start-up of new plants overseas in addition to weak demand. In the transport engineering cluster, the marine & offshore engineering segment is concerned about the lack of new orders due to uncertain oil prices, credit availability, and a downturn in the shipping industry. Outlook in the aerospace segment remains weak as the slowdown in the aviation industry continues to affect demand for maintenance, repair and overhaul (MRO) activities.

II Output Forecast for July - September 2009

4. Compared to the second quarter of 2009, a net weighted 3 per cent of manufacturers expect output to decline in the third quarter of 2009.

5. The electronics and general manufacturing clusters expect higher levels of production in the third quarter of 2009 resulting from increased orders and seasonal factors respectively. On the other hand, the precision engineering, chemicals and transport engineering clusters predict a drop in output over the next three months due to prevailing weak global demand. The biomedical manufacturing cluster also expects lower output, in anticipation of a different mix of active pharmaceutical ingredients to be produced in the third quarter of 2009.

III Employment Forecast for July - September 2009

6. A weighted 83 per cent of manufacturers expect employment in the third quarter of 2009 to remain similar to the second quarter of 2009, while a weighted 4 per cent foresee an increase and a weighted 13 per cent project a decline. Overall, a net weighted 9 per cent of companies plan to reduce headcount. This is lower than the net weighted balance figure of 23 per cent reported for the same survey conducted three months ago. Employment prospects in the precision and transport engineering clusters are expected to be the least positive in the three months ahead.

IV Factors Affecting Export Orders for July - September 2009

7. A weighted 43 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 2009. Of the weighted 49 per cent of firms that indicated export constraints, a weighted 21 per cent ranked political/economic conditions as the most important constraint.

¹In the survey conducted a quarter ago, a weighted 7 per cent of manufacturers expected an improved business outlook and a weighted 40 per cent predicted deteriorating business conditions.

Editors' Note:  

For further information on the business expectation results, please contact 
Ms Cheng Wai San 
(Tel: 6832-6708 / hp: 9841-8709 / Email: waisan@edb.gov.sg).

For media enquiries, please contact 
Mr Alex Tan 
(Tel: 6832-6284 / hp: 9841-0392 / Email: alex_tan@edb.gov.sg).

Updates on business expectations of the manufacturing sector for the third quarter of 2009 are available on http://www.news.gov.sg and http://www.sedb.com

Technical Notes

The Survey of Business Expectations of the Manufacturing Sector for the third quarter of 2009 was conducted in June to early July 2009 by the Singapore Economic Development Board. Out of a total of about 400 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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