SINGAPORE (Nikkei Markets) -- Singapore manufacturers have become slightly less optimistic about the outlook for the months ahead, but companies in the services sector have turned positive after nearly two years in the doldrums.
The findings of the two quarterly sentiment surveys released on Monday echo the general view that growth in manufacturing, which has driven the Singapore economy in the past three quarters, is set to slow although services could pick up.
According to the Economic Development Board, its latest survey of business expectations in the manufacturing sector showed a weighted 12% of manufacturers expects business conditions to improve while a weighted 8% foresees a softer business outlook.
The net balance of 4% was lower than the 7% figure in the previous survey.
As for the services sector, a separate survey conducted by the Department of Statistics showed a weighted balance of 5% of companies expects more favorable business conditions in the next six months, turning around after seven quarters when a larger number of firms predicted a worsening in conditions. In the survey carried out three months earlier, a net 1% was negative about the outlook.
The responses by companies in both surveys were weighted to reflect the size of their establishments.
Singapore's economy began recovering in the fourth quarter of 2016, helped by a turnaround in the global electronics industry. Government and private sector economists expect growth this year to exceed 2%, which would make it the fastest pace of expansion in three years.
Last week, EDB said manufacturing output in the city-state rose 13.1% in June from a year ago, marking the 11th straight month of expansion and bringing growth for the half year to 8.3%. Most economists, however, expect manufacturing growth to weaken in the second half due to the base effect and as China's capital expenditure slows.
The latest survey showed that the biomedical cluster was the most optimistic within the manufacturing sector. Optimism was also high in the precision engineering and electronics clusters, while sentiment remained bearish in the transport engineering and general manufacturing clusters.
Commenting on the findings, Selena Ling, Oversea-Chinese Banking Corp's head of treasury research and strategy, said the surveys point to a broadening of economic growth, with optimism growing in industries such as medical devices, food and beverage and accommodation even as transport engineering and retail remain in the dumps.
"The tentative signs of a broadening base for improvement" in services is positive as the effects would continue into 2018, she said.
"On balance, the headline GDP growth prospects are tilted to the higher end of the 2-3% forecast range," she added.
According to EDB, a net 5% of manufacturers plans to hire fewer workers during the third quarter of this year despite the overall improvement in business sentiment. In contrast, the Singstat survey showed a net 6% of firms in the services sector intends to hire more people, led by food and beverage, accommodation, and finance and insurance.
Manufacturing accounts for around 20% of Singapore's gross domestic product and around 14% of total employment. The services sector makes up about three quarters of the economy and provides jobs to about 72% of the workforce.
The construction sector, which employs mostly foreign workers, accounts for the remaining 5% of GDP.
OCBC's Ling said the survey's findings were consistent with a report by the Ministry of Manpower last week that showed total employment in Singapore fell for the second straight quarter in April-June, mainly due to a decline in the marine and construction workforce.