Business Expectations of the Manufacturing Sector (business sentiments for July –
31 July 2014
I Business Sentiments for July – December 2014
- The manufacturing sector expects business situation to remain positive in the second half of 2014. Overall, a weighted 9 per cent of manufacturers expect business conditions to improve while a weighted 3 per cent foresees a deterioration. This results in a net weighted balance of 6 per cent of manufacturers expecting a favourable business situation for the period July – December 2014, as compared to the second quarter of 2014.
- Within the manufacturing sector, the precision engineering cluster has the most optimistic outlook, with a net weighted balance of 11 per cent of firms projecting better business prospects in the second half of 2014. Both the machinery & systems and precision modules & components segments forecast higher orders, on the back of improved economic conditions in the US and Asia.
- The transport engineering cluster is the next most optimistic, with a net weighted balance of 10 per cent of firms forecasting a positive business outlook in the next six months ending December 2014. The marine & offshore engineering segment continues to be supported by replacement demand for oil rigs and higher orders for oil and gas-field equipment, in view of the strong oil and gas exploration activities. The aerospace and land segments expect businesses to pick up, as orders are projected to increase with better global economic conditions.
- In the general manufacturing industries cluster, a net weighted balance of 9 per cent of firms expect business situation to improve in the second half of 2014, as compared to a quarter ago. The food, beverages and tobacco segment anticipates higher festive orders, while the printing segment expects seasonal demand to lend support to its production momentum in the next six months.
- On the other hand, the chemicals cluster is the least upbeat about business conditions in the next six months ending December 2014, as compared to a quarter ago. Overall, a net weighted balance of 3 per cent of firms project a less favourable business situation. This is largely attributed to the specialties segment which expects some plant maintenance shutdowns in the second half of 2014.
II Output Forecast for July – September 2014
- Compared to the second quarter of 2014, a net weighted balance of 3 per cent of the manufacturers expects production to increase in the third quarter of 2014. All except the biomedical manufacturing cluster expect a higher level of output in the next three months.
- Within the manufacturing sector, the general manufacturing industries cluster is the most bullish with a net weighted balance of 21 per cent of firms projecting a higher level of production in the third quarter of 2014 compared to the preceding quarter. In particular, the food, beverage & tobacco segment projects a higher output level, in anticipation of the festive holidays (e.g. Hari Raya and Mid-Autumn Festival). The printing and miscellaneous industries segments project higher output of commercial printing and construction-related materials, respectively.
- The transport engineering cluster is the next most upbeat about its production activities in the next three months. The marine & offshore segment expects a sustained level of marine activity and higher production of oil and gas-field equipment in the September quarter. The aerospace and land segments also foresee higher output with secured orders on hand.
- In contrast, the biomedical manufacturing cluster is the least upbeat, with a net weighted balance of 11 per cent of firms projecting lower production in the third quarter of 2014, as compared to a quarter ago. While the medical technology projects a higher level of production to meet export demand, the pharmaceutical segment plans to produce a lower volume of active pharmaceutical ingredients in the next three months.
III Employment Forecast for July – September 2014
- Employment prospects in the manufacturing sector for the third quarter of 2014 are expected to remain positive. A weighted 97 per cent of firms in the manufacturing sector expect employment levels to increase or remain similar compared to the second quarter of 2014. The precision engineering and the general manufacturing clusters are the most upbeat about hiring expectations in the three months ahead.
IV Factors Affecting Export Orders for July – September 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 third quarter of 2014. The weighted 38 per cent of firms that indicated export constraints cited price competition from overseas competitors and economic and 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 2014 was conducted between June 2014 and July 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.
31 July 2014