SINGAPORE (Nikkei Markets) -- Singapore businesses have turned bearish about prospects, two government surveys showed, with sentiment weakest in the electronics industry amid a turn in the business cycle and concerns about the continuing trade war between the U.S. and China.
The change in outlook comes as Singapore's trade-driven economy shows more evidence of a slowdown. Non-oil exports have fallen for the past two months while bank lending edged lower in December from November.
The moderation has strengthened hopes of some help for the city-state's firms. Finance Minister Heng Swee Keat is expected to announce an expansionary budget on February 18 with incentives for companies seeking to restructure or regionalize their operations.
The Singapore Economic Development Board said its latest quarterly survey of expectations in the manufacturing sector showed a net weighted 14% of manufacturers anticipate a less favorable business situation in the next six months. This was much worse than the net 1% that predicted deteriorating conditions in the previous survey.
A separate survey by the Department of Statistics showed a net 4% of businesses in the services sector expect conditions to weaken. That's a turnaround from the previous quarter when a net 3% were optimistic about prospects. The sentiment among firms in the services sector was the weakest since January 2017.
Both surveys assigned weights to respondents based on the size of their operations, with the overall sentiment reflecting the difference between those expecting an improvement in business and those predicting tougher times.
For example, EDB derived the net 14% of manufacturers that were negative about prospects based on the weighted 5% that expected business conditions to improve and the weighted 19% that were bearish. The balance 76% of manufacturers said conditions would likely remain similar to those in recent months.
According to EDB, a weighted 46% of manufacturers in the electronics sector had a negative outlook for the next six months compared with 1% that expected an improvement. A net weighted 29% also predicted lower output in the January to March quarter compared to the preceding period, while 8% said they expected to reduce headcount.
EDB said the electronics industry is facing softening demand for semiconductors and semiconductor-related equipment. even as concerns over global trade tensions grow.
Confidence in the precision engineering, chemicals and general manufacturing clusters was also negative, but those in the biomedical and transport engineering clusters remained positive about the outlook.
EDB said confidence in the transport engineering cluster was led by the marine and offshore engineering segment, which is expecting a modest uptick in demand for oil and gas-field equipment and ship-repairing activities in the first half of this year.
The board warned, however, that orders for offshore rigs, a mainstay for Singapore companies such as Keppel Corp and Sembcorp Marine, remain subdued.
As for the services sector, the Department of Statistics said those in the information and communications and food and beverage clusters were most bullish about the outlook, while those involved in accommodation, transport and storage, and wholesale trade were the most pessimistic.
"Wholesalers as well as banks and finance companies expect the ongoing trade conflict between the U.S. and China to have a negative impact on business," the department said.
Song Seng Wun, an economist at CIMB Private Bank, said the dip in business confidence was expected, as many companies are experiencing slower orders amid the more uncertain economy.
But Singapore is unlikely to slip into a recession as Southeast Asia remains one of the world's fastest-growing regions, he added.
--Kevin Lim
