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The manufacturing sector is optimistic about business conditions in the second half of 2007.
I Business Expectations for July - December 2007
1. The manufacturing sector is optimistic about business conditions in the second half of 2007. Overall, a weighted 28 per cent of manufacturers project an improved outlook, while 6 per cent predict deterioration. The result is a net weighted balance of 22 per cent of manufacturers expecting business conditions to improve, compared with the 26 per cent recorded a quarter ago. Whilst manufacturers on the whole expect demand to hold, there is some easing of sentiments moving into the second half of 2007.
2. Business expectations in the electronics cluster for the second half of 2007 remains generally positive, albeit with some moderation in sentiments amongst chip-makers. A net weighted balance of 34 per cent of manufacturers in this cluster predict better business conditions in the next six months ending December 2007, compared to the 38 per cent registered a quarter ago. In terms of employment, only a net weighted balance of 13 per cent of firms expect to hire more workers, compared with the 24 per cent recorded last quarter. On the production front, however, output volume in all segments of the cluster is expected to rise over second quarter levels, in line with the traditionally stronger third quarter ramp up for the year-end holiday season.
3. Manufacturers in the chemicals cluster expect the business situation in second half of the year to remain largely the same. Positive sentiments in the specialties and other chemicals segments were muted by worsening expectations in the petrochemical segment, caused by rapid increase in raw material prices and inability to pass down cost increases to customers. Output forecast for the third quarter of 2007 mirrors the business sentiments, with third quarter output in the specialties and other chemicals segments expected to increase over second quarter levels due to global demand, whilst several planned maintenance shutdowns by petrochemicals manufacturers result in lower expected output for the segment in the third quarter compared with the second quarter.
4. A weighted 90 per cent of the biomedical manufacturing cluster expects business conditions to remain stable for the last six months of 2007, compared with the second quarter of the year. In the pharmaceutical segment, production is anticipated to be higher on a quarter to quarter basis in order to build up stock and meet deliveries in the third quarter of the year. Output in the medical technology segment is also expected to increase in the third quarter over the second quarter, along with some draw-down of finished good stocks, in order to meet anticipated increases in exports.
5. Business outlook in the precision engineering cluster is weaker for the next six months ending December 2007, relative to the previous quarter. A net weighted balance of 12 per cent of firms in this cluster expect conditions to improve, compared with the 24 per cent recorded last quarter. Production wise, the machinery & systems segment anticipates output to rise in the third quarter over second quarter, in response to expected increases in export orders. In the precision modules & components segment, however, third quarter output is expected to remain the same as second quarter levels.
6. A net weighted balance of 25 per cent of firms in the transport engineering cluster expect the business environment to improve in the second half of the year. This is similar to the 26 per cent recorded a quarter ago. The marine & offshore engineering segment continues to foresee an increase in output in the third quarter of 2007 compared with the second quarter, despite a tight labour market. Increase in engine overhaul and repair works are also expected in the aerospace segment, with demand stemming mostly from overseas customers. Output in the land transport segment, however, is expected to fall on a quarter to quarter basis, as anticipated according to contractual delivery schedules.
7. The general manufacturing industries cluster is most optimistic, with a net weighted balance of 37 per cent of manufacturers anticipating an improved business situation. In particular, sentiments in the food, beverages & tobacco and miscellaneous industries segments are stronger in the third quarter of 2007 as consumer spending and the construction sector performance remains strong. Output in these segments is also expected to increase in the third quarter of the year to fulfill anticipated increases in both domestic sales and direct exports.
II Factors Affecting Export Orders for July - September 2007
8. A weighted 52 per cent of firms in the manufacturing sector reported no limiting factors affecting their ability to obtain more export orders in the third quarter of 2007. Out of the weighted 43 per cent of manufacturers which cited factors affecting their ability to obtain more export orders, a weighted 28 per cent ranked price competition from overseas competitors to be the most important limiting factor. A weighted 9 per cent also cited other factors, such as raw material and hiring constraints, limiting their ability to accept more orders.
Editors' Note:
For further information on the business expectation results, please contact Ms Millie Lam (Tel: 6832-6031 / hp: 9740-7372 / Email: milliel@edb.gov.sg).
For media enquiry, please contact Ms Constance Soh (Tel: 6832-6628 / hp: 9159-6282 / Email:csoh@edb.gov.sg).
Updates on business expectations of the manufacturing sector for the third quarter of 2007 are available on http://www.sprinter.gov.sg and http://www.sedb.com
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