Better outlook but firms still cautious

Conditions likely to remain difficult in some sectors, they say

THE economic data looks better and the hard numbers out yesterday indicate the country is out of a recession but bosses are sticking to a cautious approach.

Despite the better outlook reflected in the gross domestic product flash estimates, some firms are still painting a not-so-rosy picture, with conditions remaining difficult in a number of sectors.

The Ministry of Trade and Industry's preliminary data shows GDP jumped at an annualised, seasonally adjusted 20.4 per cent in the three months to June from the previous quarter, led by the biomedical and electronics sectors.

The MTI now expects the economy to shrink between 4 per cent and 6 per cent this year, better than its previous forecast of a contraction of between 6 per cent and 9 per cent.

That still adds up to a difficult year for many businesses, despite stock markets and property prices going up.

Mr Douglas Foo, chief executive of Apex-Pal International, which runs the Sakae Sushi restaurant chain, said that the property and stock market gains have not translated into an increase in spending at his outlets.

He is not taking his eyes off the ball anytime soon despite talk of 'green shoots' of recovery by some economists.

'We'll still have our promos going on once every two weeks compared with promos once a month last year,' Mr Foo said.

These promotions could be salmon fairs, where customers can get whole bundles of salmon products at attractive prices.

Consumers, lured by huge discounts, are visiting the malls but many are cutting back on their spending.

Mr Patrick Chai, chairman and chief executive of Blush!, the local lingerie retailer, said that while demand for lingerie is holding firm, items like shirts and neckties are getting short shrift.

'People are walking around the malls, but confidence is still not there, so very few of them are buying,' Mr Chai said.

He first resorted to discounts. Prices of shirts went from $49 late last year to $29, but few customers were biting. Earlier last month, he advertised two shirts for $29 and he managed to sell 1,000.

'Of course, people bought them, but is it sustainable for me? I'm basically doing it at cost price,' Mr Chai added.

It appears as if the brown weeds are working their way through to other industries. For one thing, the demand for electronic products and transportation services remains sluggish and nowhere near the levels seen last year.

Network Courier had slightly more deliveries from May to June but they are still down by about 20 per cent from last October.

'We can't take this rebound lightly and we've to be cautious,' said managing director V. S. Kumar.
The boss of an electronics firm which supplies products to customers such as Venture Corp and Chartered Semiconductor Manufacturing said that while there was a rebound in orders last quarter, the outlook is still cloudy.

Venture is a contract electronics manufacturer and Chartered makes chips used in MP3 players and mobile phones.

'My gut feel is that things are not going to look better,' said the businessman, speaking on condition of anonymity.

'A big consumer of high-technology products is the US, but they're still not yet out of the woods.'
Mr Kervin Low, who handles corporate development for Kim Ann Engineering, said business is expected to fall 20 per cent on a year-on-year basis despite a slight pick-up in metal sales in the second quarter over the first.

The firm supplies specialised steel to manufacturers in different industries, including oil and gas, precision engineering and aerospace.

The MTI has warned that the rebound in manufacturing could wane over the rest of the year as a sizeable part of the sector's uptick came from a spike in biomedical output and electronics inventory restocking.

Mr Teng Theng Dar, chief executive of the Singapore Business Federation, summed it up this way: 'While we should be optimistic about the economy and the prospects for business, it would be best to sight third- quarter results for a clearer picture of where the economy is heading.'

Source: Straits Times, 15 July 2009