SINGAPORE – More local manufacturers and services firms are optimistic about business conditions in the months ahead due to factors such as a boom in products related to artificial intelligence (AI) and the return of travel, separate surveys showed on April 30.

A net weighted balance of 22 per cent of manufacturing firms anticipate a favourable business situation for the April to September period, compared with the first quarter of 2024, according to a poll by the Economic Development Board (EDB).

This is much higher than the 10 per cent figure in its previous quarterly survey.

Meanwhile, a Singapore Department of Statistics (SingStat) survey showed that for the services sector, a net weighted balance of 7 per cent of companies expect a more favourable business outlook, up from 5 per cent in the previous poll.

The net weighted balance is the difference between the weighted shares of positive and negative responses, with a positive figure indicating more optimism than pessimism. 

In the manufacturing sector, all clusters expect their business situation to improve, with electronics emerging as the most optimistic.

The cluster had a net weighted balance of 40 per cent of firms projecting positive business prospects in the six months to September, compared with the first quarter.

Firms in the semiconductor and other electronic modules and components segments are especially bullish, amid better demand in consumer electronic devices. Strong AI server demand is also expected to boost orders for memory, storage and networking chips.

The transport engineering cluster’s marine and offshore engineering segment anticipates a rise in projects from the global oil and gas and offshore renewables markets.

The aerospace segment also expects robust demand for aircraft maintenance, repair and overhaul jobs as global and regional air travel returns to pre-pandemic levels.

Meanwhile, the precision engineering cluster had a net weighted balance of 10 per cent of firms setting their sights on better business prospects, even as orders for the machinery and systems segment might experience some near-term weakness.

The cluster’s precision modules and components segment expects that orders will improve, with the upturn in the global semiconductor industry.

In general manufacturing, the food, beverages and tobacco segment is likely to see higher export demand for animal feeds and beverage concentrates.

On the other hand, firms in both the printing and miscellaneous industries segments are concerned about higher operating costs, with the printing industry also expecting fewer jobs due to digitalisation.

When it comes to output, a net weighted balance of 2 per cent of manufacturers expect higher output in the second quarter, compared with the first.

Precision engineering, transport engineering and general manufacturing project a higher level of production, while the rest of the manufacturing clusters expect a decline.

The precision engineering cluster’s machinery and systems segment expects higher production of semiconductor-related equipment to meet the backlog of orders, while its precision modules and components segment foresees higher output in plastic precision components, bonding wires and electronic connectors.

The transport engineering cluster’s aerospace segment predicts more aircraft maintenance jobs as demand for air travel stays buoyant.

Firms in the marine and offshore engineering segment also expect a higher volume of work in ship repair and offshore conversions, as well as oil and gas field equipment.

But the electronics cluster’s semiconductors segment expects output will stay subdued as customers continue to draw down inventories.

Another segment in the cluster – other electronic modules and components – expects higher production of components, amid improved demand for consumer electronic goods and internet of things applications.

The biomedical manufacturing cluster expects the largest decline in output, with a net weighted balance of 24 per cent of firms expecting a lower level in the second quarter of 2024, compared with a quarter ago.

Its pharmaceuticals segment expects output to fall due to a different product mix, while the medical technology segment foresees lower export orders for diagnostic instruments.

As for manpower, a majority of companies in the manufacturing sector expect employment levels in the second quarter of 2024 to remain similar to the first quarter. The transport engineering and chemicals clusters plan to hire more workers, while the rest of the manufacturing clusters foresee a reduction in workers.

Most manufacturing firms – a weighted 79 per cent – reported no limiting factors that would affect their obtaining of export orders in the second quarter of 2024.

The top two issues that they thought could be challenges are price competition from overseas, and political or economic conditions abroad, such as geopolitical tensions and inflationary pressures, EDB said.

A weighted 52 per cent of manufacturers plan to invest in plant and machinery in the 12 months to March 2025, largely to replace worn-out equipment and install new production technology.

Over in the services sector, SingStat said hoteliers expect occupancy rates to improve, due to an expected rise in the number of Mice (meetings, incentives, conferences and exhibitions) events and the Singapore Grand Prix in September.

There is also optimism in the wholesale trade industry. In particular, wholesalers of computers, computer peripheral equipment and software look forward to higher customer demand as computers with AI capabilities hit the market.

The recreational, community and personal services industry also expects a pickup in business. Health services firms foresee an increase in foreign patients and continued demand for primary healthcare, and new childcare services centres are set to open.

But the retail trade and food and beverage sectors are less upbeat about the six months to September, as there will be fewer festive periods relative to the six months prior.

Slightly more than half of the industries in the services sector foresee higher revenue for the second quarter of 2024.