Businesses see bleaker outlook

Manufacturing, financial services most gloomy but hotels, eateries unfazed

GLOOM is spreading among firms in the key manufacturing and service industries in Singapore, as the global economic slowdown intensifies.

More companies now expect business conditions to worsen over the next six months, compared to when they were last polled three months ago, according to two government surveys yesterday.

The most pessimistic are firms involved in financial services, property, chemicals, precision engineering, electronics and biomedicals. Likely to be the worst hit by the deepening financial crisis and weakening global demand, many more are forecasting cloudy skies ahead rather than sunny ones.

But hotels, restaurants and caterers are surprisingly optimistic, with four in 10 predicting a brighter outlook between now and next March. More than 90 per cent also expect to keep the same number of jobs or hire more people by the year end.

This could be partly because of the upcoming holiday season, said Barclays economist Leong Wai Ho.

'Restaurants and caterers tend to be more hopeful as they approach the traditional peak festive period from November to January,' he suggested.

'Given that there have been no significant job losses to date, and that more Singaporeans may be scaling down their overseas holiday plans, restaurant and catering revenues here may not take too much of a hit.'

Elsewhere, however, the outlook is increasingly grim.

Among manufacturers, 28 per cent believe the situation will deteriorate between now and next March, up from only 12 per cent in July, said the Economic Development Board (EDB). It surveyed almost 400 manufacturing firms over the last two months.

Most of the remaining companies think things will stay the same, with about one in 10 expecting conditions to improve.

Companies in the service sector were slightly more optimistic, buoyed by the wave of cheeriness among restaurants and caterers.

On the whole, 26 per cent of service firms now believe things will get worse, up from 22 per cent in July, according to the Department of Statistics, which polled about 1,400 companies in the industry.

In particular, firms in financial services see a bleak immediate future across the board. From banks and finance companies to brokers and fund managers, not a single one predicted business conditions would improve in the next six months.

Real estate companies have an equally bleak outlook, with only 1 per cent believing things will get better soon and 42 per cent anticipating the opposite.

But for the fourth quarter of this year, most firms in the service sector are expecting business to remain stable. Almost all industries - including wholesalers, retailers, caterers and business services - also plan to hire more people than in the third quarter, with the exception of financial services and hoteliers.

For manufacturing, most industries plan to cut employment in the fourth quarter, except for the transport engineering and general manufacturing clusters.

Barclays' Mr Leong expects business expectations to 'get progressively worse'.

'All the signs in the United States, Europe and Japan are pointing to a more severe slump than we had earlier expected,' he said.

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