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Friday, 30 January 2009

Business outlook darkens

BUSINESS sentiments in Singapore's manufacturing and services sectors have further darkened in the face of the worsening global economic downturn.

More companies expect the business situation to deteriorate in the first six months and orders to further weaken due to the steep global economic decline.

The firms most affected are those in the electronics, precision engineering and chemical clusters.

Outlook for the services sector is also less upbeat, with firms expecting business conditions to become less favourable.

The dismal expectations were borne out in two government surveys released on Friday.

In the survey carried out by the Singapore Economic Development Board (EDB) between December and January, which polled 412 manufacturing firms, 63 per cent anticipate deterioration in the sector, with only 6 per cent expecting the situation to improve from January to June.

Overall, 57 per cent of manufacturers expect a less favorable business outlook in the first half year compared to the fourth quarter of 2008.

'The weak business sentiment is broad-based, affecting all clusters in the manufacturing sector,' said the EDB in a statement.

'The transport engineering cluster shows less optimism in the first half of 2009 compared to a quarter ago. Within the cluster, the marine & offshore segment expects a drop in orders, resulting from credit tightening and falling oil prices. The aerospace segment also foresees lower maintenance, repair and overhaul activities with the slowdown in the airline industry.'

The rest of the manufacturing clusters are also significantly less optimistic as they foresee further weakening of orders in the next six months, brought about by the steep decline in global economic conditions.

The firms most affected are those in the electronics, precision engineering and chemical clusters.

Compared to the fourth quarter of 2008, 52 per cent of manufacturers expect output to decline in the first three months of this year.

About 70 per cent of manufacturers expect employment in the first quarter to remain similar to the fourth quarter of 2008, but 29 per cent anticipate a reduction in headcount. Only 1 per cent expect to hire more workers.

In the survey on the services sector conducted by the Department of Statistics from December to mid-January, firms expect the business situation ahead to be less favourable.

Overall, 53 per cent expects business conditions to deteriorate in the next six months, compared to the previous six months, when 15 per cent were more pessimistic.

Within the wholesale trade industry, 45 per cent is less upbeat about business prospects for the next six months.

These include wholesalers of household electrical appliances and equipment, petroleum and petroleum products, chemicals and chemical products, other non-agricultural intermediate products and electronic components.

Expectations among firms in the retail trade industry project were also less favourable.

Department store owners as well as retailers of motor vehicles, pharmaceutical and medical goods, wearing apparel and footwear, furniture, furnishings, jewellery and watches are among those who foresee a drop in business activity in the coming months.

The transport and storage industry also expects slower business, as do shipping lines, firms providing air transport services, storage and warehousing services, ship and boat leasing services as well as freight forwarding, packing and crating services.

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