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Nikkei Markets

Singapore manufacturers despondent but services still upbeat

Government surveys point to resilient job market

Singapore's non-oil domestic exports have fallen for four consecutive months.   © Reuters

SINGAPORE (Nikkei Markets) -- Services companies in Singapore remained sanguine about prospects even as confidence among manufacturers took a beating, a sign of relative health in the economy despite slumping exports.

The Department of Statistics said its latest quarterly survey of business expectations in the services sector showed a weighted 14% of companies were optimistic about business conditions in the next six months. This compared with 12% that saw a slowdown in activity.

However, the net weighted 2% of companies that were confident about prospects was smaller than the 4% in the previous survey.

By contrast, a separate survey by the Economic Development Board showed a net 11% of manufacturers expect business conditions to remain soft in the second half of this year, marking a sharp turnaround from the previous quarter when 1% expressed confidence about the outlook.

The sentiment was weakest in electronics and precision engineering, which together account for around 40% of manufacturing output.

The EDB attributed the weaker outlook in those areas to the subdued demand for semiconductors and semiconductor-related equipment as well as uncertainties arising from the U.S.-China trade conflict that has broadened to the global technology sector.

Both surveys assign weights to respondents to reflect the size of the operations in Singapore.

The city-state's non-oil domestic exports have now fallen for four consecutive months, dragging economic growth for the second quarter to just 0.1% year on year, the slowest since the end of the global financial crisis. However, the government does not expect a full-year recession as there are still areas of strength within the economy, deputy prime minister Heng Swee Keat said after the data were released.

Manufacturing accounts for about 22% of Singapore's gross domestic product while the services sector makes up around 70%.

"While it is evident that Singapore's growth momentum has deteriorated markedly in the first half...there are signs that growth will likely stabilize and pick-up into the end of 2019," United Overseas Bank said in a note earlier this week, citing the still resilient labor market, strength in several services clusters and a recovering construction industry.

According to the Department of Statistics, industries that retained a positive outlook about prospects included accommodation, food and beverage services, information and communications, and transport and storage.

By contrast, retail trade, wholesale trade and financial industries were less optimistic about prospects.

The department said a net weighted balance of 5% of services companies expect an increase in hiring activity in the three months to September.

As for the manufacturing sector, the EDB said the biomedical, transport engineering and general manufacturing clusters were positive about the outlook, while companies in the chemicals industry were pessimistic due to declining margins and weaker regional demand, particularly from China.

According to the EDB, a net 85% of manufacturing companies expect employment levels in the current quarter to remain similar to the three months ended June, while overall, just 1% planned to hire fewer workers.

Singapore's unemployment rate for citizens edged higher in the second quarter to 3.3%, advance estimates showed. The Ministry of Manpower said most employers have refrained from laying off existing workers although there was greater caution in hiring.

--Kevin Lim

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