Business expectations of the manufacturing sector (business sentiments for April – September 2014)30 April 2014
I Business Sentiments for April – September 2014
- Business sentiments in the manufacturing sector is expected to be positive in the next six months ending September 2014, on the back of improved economic conditions in the US and Europe. Overall, a weighted 12 per cent of manufacturers expect business conditions to improve while a weighted 5 per cent foresees deterioration. This results in a net weighted balance of 7 per cent of manufacturers expecting a favourable business situation for the period April – September 2014, as compared to the first quarter of 2014.
- Within the manufacturing sector, the precision engineering cluster is the most optimistic. A net weighted balance of 24 per cent of firms expect better business prospects in the next six months ending September 2014 compared to a quarter ago. The machinery and system segment projects higher orders for semiconductor related equipment, on account of better demand in the global semiconductor market and improved economic conditions in the US and Europe. The precision modules and components segment also foresees more orders from both the local and overseas markets in the six months ahead.
- The general manufacturing industries is the next most optimistic with a net weighted balance of 7 per cent of firms anticipating better business prospects in the next six months ending September 2014. Within the cluster, the printing segment expects business to pick up, following the seasonally less active first quarter of the year. In the miscellaneous industry segment, positive sentiments are supported by firms engaging in construction materials and battery production.
- For the electronics cluster, a net weighted balance of 4 per cent of firms expect business conditions to pick up for the period of April to September 2014. This is a turnaround from the net weighted 5 per cent of electronic firms which expected deterioration in the preceding quarter. The optimistic outlook is mainly led by the semiconductor segment which expects increased orders, especially for chips used in smartphones and tablets.
- On the other hand, the chemicals cluster is the least upbeat about business conditions in the next six months ending September 2014 as compared to a quarter ago. Overall, a net weighted balance of 1 per cent of firms project a less favourable business situation. This weak sentiment is largely attributed to the petroleum refining segment which expects refining margins to remain soft in the months ahead.
II Output Forecast for April – June 2014
- Compared to the seasonally less active first quarter of 2014, a net weighted 15 per cent of the manufacturers expect output to increase in the second quarter of 2014. All, except the chemicals cluster, expect higher output levels.
- Within the manufacturing sector, the biomedical manufacturing cluster is the most upbeat, with a net weighted balance of 28 per cent of firms projecting a higher level of production in the second quarter of 2014, as compared to a quarter ago. Both the pharmaceutical and medical technology segments forecast higher output levels to meet export demand ahead.
- The precision engineering cluster is the next most bullish with a net weighted balance of 19 per cent of manufacturers predicting higher output in industries such as semiconductor related equipment, process control equipment and metal precision components. In the transport engineering cluster, the marine and offshore engineering segment anticipates a higher level of output in the second quarter of 2014 with secured orders on hand.
- In contrast, the chemicals cluster expects output to decline in the second quarter of 2014 compared to a quarter ago. This is largely due to the scheduled maintenance shutdowns in the petroleum refining segment.
III Employment Forecast for April – June 2014
- In terms of employment forecast, a net weighted 9 per cent of firms in the manufacturing sector plan to hire more workers in the second quarter of 2014 compared to the first quarter of 2014. Within the manufacturing cluster, the biomedical manufacturing and general manufacturing clusters are most upbeat about hiring expectations in the three months ahead.
IV Factors Affecting Export Orders for April – June 2014
- A weighted 56 per cent of firms in the manufacturing sector reported no limiting factors that will affect their ability to obtain direct export orders in the second quarter of 2014. The weighted 39 per cent of firms that indicated export constraints, cited price competition from overseas competitors as well as economic and political conditions abroad as the most important limiting factors.
V Investment Plans for April 2014 – March 2015
- A weighted 75 per cent of manufacturers plan to invest in plant and machinery in the next twelve months (April 2014 – March 2015) compared to the past twelve months. Of which, a weighted 53 per cent of firms expect higher or similar levels of capital expenditure. The planned investments are largely for the replacement of worn-out equipment, expanding production capacity of existing products, and manufacturing of new products.
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The Survey of Business Expectations of the Manufacturing Sector for the second quarter of 2014 was conducted between March 2014 and April 2014 by the Economic Development Board. Out of a total of 428 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.
30 April 2014