More firms expect slower growth in second half

THE key manufacturing and services sectors are still optimistic about the months ahead but more bosses are bracing themselves for slower growth.

Two surveys out yesterday point to a change in the economic climate, which could bring slower growth and a cut-back on hiring.

An Economic Development Board (EDB) poll showed that a weighted 25 per cent of manufacturers expect business conditions to improve over the next six months, down from 34 per cent in the April survey. And a weighted 7 per cent of companies felt things would get worse in the second half, up from 5 per cent three months ago.

About 376 manufacturers were surveyed between May and June.

Within manufacturing, firms in the electronics sector which have seen a huge uptick in fortunes over the past six months remained the most positive.

A weighted 43 per cent said things will get better, and another 45 per cent expect to increase production for the third quarter, with more export orders coming for Christmas.

'The firms foresee orders being sustained by demand for consumer electronic products such as wireless handsets and mobile computing devices,' said the EDB.

But only 7 per cent of manufacturers expect to hire workers over the next six months compared with 10 per cent three months ago.

Hiring is expected mainly in the electronics and precision engineering sectors.

OCBC economist Selena Ling said: 'We are seeing a more cautious tone. Certain sectors will be looking at a more modest pace of growth.

'Manufacturing is not going to be the main job creator going ahead, services is going to be, and we are really talking about the financial and tourism sectors in particular.'

A Department of Statistics survey of about 1,400 firms in the services sector found that a weighted 39 per cent of firms expect a more positive outlook, down from 45 per cent three months ago.

More firms also felt that things would stay the same, while slightly fewer firms said things would get worse.

The opening of the two integrated resorts and the upcoming Youth Olympic Games (YOG) and Formula One (F1) race appear to have given the services sector a boost in prospects.

The most positive were those in amusement and recreation - a new industry category that first appeared in the April survey.

A weighted 67 per cent in this segment expect a brighter second half, up from 34 per cent three months ago, while 51 per cent of hotels and caterers also expect things to get better, up from 48 per cent in April.

A weighted 40 per cent of companies in the information and communications sector also believe things will improve, compared with just 11 per cent in April.

Hoteliers also expect a rise in occupancy and the hiring of more people for the next three months for the F1 and YOG.

In April, 70 per cent of banks, fund managers and insurers felt things would get better but this has fallen to 41 per cent, with 4 per cent expecting worse conditions. Three months ago, no one expressed such pessimism.

But firms in the financial sector are the most bullish about hiring, with 46 per cent expecting to increase employment, a reflection that fund flows are still coming into Asia and Singapore, said Ms Ling.

Source: Straits Times, 31 Jul 2010