Business expectations of the manufacturing sector (Business Sentiments for January – June 2016)

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I      Business Sentiments for January – June 2016

  • Business outlook in the manufacturing sector is expected to be weak in the first half of 2016, on the back of global economic uncertainties, the ongoing slowdown in China and a low oil price environment. A weighted 7 per cent of manufacturers expects business conditions to improve while a weighted 29 per cent foresees deterioration. Overall, a net weighted balance of 22 per cent of manufacturers anticipates a less favourable business situation for the period January – June 2016, compared to the fourth quarter of 2015.
  • The weak business sentiment is broad-based, with almost all clusters foreseeing a decline in business situation in the next six months ending June 2016. The exception is the biomedical manufacturing cluster, where a net weighted balance of 17 per cent of firms anticipates a positive business outlook ahead. Both the pharmaceuticals and medical technology segments are optimistic, as there are plans to introduce new products in the former and strong export demand in the latter.
  • In the general manufacturing cluster, a net weighted 18 per cent of firms expect a less optimistic business outlook in the first half of 2016. This is largely led by the miscellaneous industry segment which anticipates lower levels of business activities due to the slowdown in domestic construction activities and depressed oil prices. On the other hand, a net weighted 5 per cent of firms in the food, beverage & tobacco segment anticipate higher festive orders (e.g. due to the Lunar New Year).
  • A net weighted balance of 18 per cent of firms in the chemicals cluster is less upbeat about business prospects in the six months ahead. Within the cluster, the petroleum refining segment is weighed down by excess supply of refined petroleum products in the region while the specialties segment is impacted by weaker regional demand, particularly in China.
  • In the precision engineering cluster, a net weighted 18 per cent of firms anticipates business situation to worsen in the six months ending June 2016. Both the machinery & systems and precision modules & components segments forecast a lower level of orders from the oil & gas and semiconductors industries.
  • In the electronics cluster, a net weighted balance of 32 per cent of electronics firms expects a less favourable business situation ahead. The weak sentiment is broad-based and due in part to seasonal factors. For the transport engineering cluster, a net weighted balance of 39 per cent of firms expects business situation to remain challenging in the first half of 2016, particularly the marine & offshore engineering segment. Demand for rigs and offshore conversions have been dampened considerably with persistently low oil prices.

II     Output Forecast for January – March 2016

  • A net weighted balance of 31 per cent of manufacturers expects output to decrease in the first quarter of 2016, compared to the fourth quarter of 2015.
  • All clusters forecast a lower level of production in the seasonally less active first quarter of 2016. Other factors such as lacklustre global economic conditions, slowing growth in China and sustained low oil prices will continue to weigh on production.

III    Employment Forecast for January – March 2016

  • Hiring expectations in the manufacturing sector are expected to be weak in the first quarter of 2016, compared to the fourth quarter of 2015. A weighted 5 per cent of manufacturers plan to hire more workers while a weighted 11 per cent expects to reduce the number of workers employed. Overall, a net weighted balance of 6 per cent of manufacturers foresees lower employment in the first quarter of 2016. All except the biomedical manufacturing cluster expect to hire fewer workers in the period January – March 2016.

IV    Factors Affecting Export Orders for January – March 2016

  • A weighted 58 per cent of firms in the manufacturing sector reported no limiting factors that will affect their ability to obtain direct export orders in the first quarter of 2016. The weighted 36 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.

 

Editors' Note:

For media enquiries, please contact 
Ms Yu Qinyan  
(Tel: 6832-6427 / HP: 9733-9437 / Email: yu_qinyan@edb.gov.sg).

For further information on the business expectation results, please contact 
Ms Leong Pui Ling 
(Tel: 6832-6737 / HP: 9877-2580 / Email: leong_pui_ling@edb.gov.sg). 

 

Technical Notes

The Survey of Business Expectations of the Manufacturing Sector for the first quarter of 2016 was conducted between December 2015 and January 2016 by the Economic Development Board. Out of a total of 430 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.

About the Singapore Economic Development Board

The Singapore Economic Development Board (EDB) is the lead government agency for planning and executing strategies to enhance Singapore’s position as a global business centre. EDB dreams, designs and delivers solutions that create value for investors and companies in Singapore. Our mission is to create for Singapore, sustainable economic growth with vibrant business and good job opportunities. EDB’s ‘Home’ strategy articulates how we are positioning Singapore for the future. It is about extending Singapore's value proposition to businesses not just to help them improve their bottom line, but also to help them grow their top line through establishing and deepening strategic activities in Singapore to drive their business, innovation and talent objectives in Asia and globally. 

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Table Annex
- 29 January 2016

Business expectations of the manufacturing sector (Business Sentiments for January – June 2016)