MANUFACTURING | Staff Reporter, Singapore

Precision engineering firms lead optimism in manufacturing sector

About 39% of them expect better business conditions, compared to 13% of firms overall.

Only 2% of manufacturers have a negative business outlook for April to September 2018, whilst 15% are positive about business in the same time period, the Economic Development Board (EDB) revealed. The majority (83%) are neutral about their business outlook.

Overall, a net weighted balance of 13% of manufacturers expects a favourable business situation. Within the manufacturing sector, all clusters anticipate better business prospects in the next six months ending September 2018.

“The precision engineering cluster is the most optimistic, with a net weighted balance of 39% of firms anticipating improved business conditions... This positive sentiment is largely led by the machinery & systems segment, which foresees continued strong demand for semiconductor-related equipment in the next six months ending September 2018,” EDB said.

Meanwhile, the precision modules & components segment expects a slight weakening of business conditions because of rising business costs.

EDB also noted that in the electronics cluster, 14% of firms expect a favourable operating environment to prevail in the next six months. The semiconductors segment foresees sustained demand for chips globally whilst the other electronic modules & components segment expects export demand to pick up in the months ahead.

About 10% of the biomedical firms anticipates a positive business outlook as both the pharmaceuticals and medical technology segments are optimistic, in anticipation of higher export demand.

In the transport engineering cluster, only 9% of firms expects better business prospects in the next six months. Within the cluster, the aerospace segment foresees more aircraft engine repair orders whilst the marine & offshore engineering segment anticipates marginal improvement in the business environment, amidst a modest pick-up in crude oil prices.

Compared to the first quarter of 2018, about 24% of manufacturers expects output to increase in the second quarter of 2018. The positive output outlook is broad-based across all clusters. About 57% of firms in the biomedical manufacturing cluster are bullish, making them the most optimistic.

Only 4% of manufacturers plans to hire fewer workers. “The weak employment outlook came largely from the transport engineering cluster, particularly the marine & offshore engineering segment,” EDB added.

Meanwhile, about 77% of firms reported no limiting factors that would affect their ability to obtain export orders. “The weighted 19% of firms that faced export constraints cited price competition from overseas competitors and economic and political conditions abroad as the most important limiting factors,” EDB said.

Lastly, more than half (61%) of manufacturers plans to invest in plant and machinery between April 2018 to March 2019. Of which, 48% of firms expects higher or similar levels of capital expenditure. “The planned investments are largely for the replacement of worn-out equipment, expanding the production capacity of existing products and installation of new production technology,” EDB concluded. 

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