Azernews.Az

by Alimat Aliyeva

Manufacturers in Singapore remain cautiously optimistic about business conditions over the next six months, supported by a strong global semiconductor upcycle, while firms in the services sector expect a slightly weaker outlook due to persistent inflation pressures and ongoing geopolitical uncertainty, according to official surveys released on Thursday, AzerNEWS reports, citing foreign media.

A net weighted balance of 17% of manufacturing companies expects improved business conditions between April and September, the Singapore Economic Development Board reported. The strongest optimism is seen in precision engineering and electronics, with net positive readings of 51% and 42%, respectively. This confidence is largely driven by continued global investment in artificial intelligence infrastructure and semiconductor manufacturing equipment.

The transport engineering cluster also maintains a positive outlook, supported by steady demand in the aerospace sector, particularly for maintenance and repair services, even as higher fuel costs continue to weigh on margins.

In contrast, the biomedical manufacturing, general manufacturing, and chemicals clusters are all expecting a deterioration in business conditions over the next six months. The chemicals sector stands out as the most pessimistic, with a net 53% of firms forecasting weaker conditions. Petrochemical and petroleum companies cite potential supply disruptions from the Middle East, which could increase feedstock costs and compress profit margins. A net 46% of chemical firms also expect lower production in the coming quarter.

Overall, manufacturers anticipate a modest increase in factory output in the second quarter, with a net weighted balance of 20% expecting higher production. Employment levels are expected to remain broadly stable, with 78% of firms planning no change in staffing. However, most clusters—except chemicals and biomedical—are still planning selective hiring to support operational needs.

Encouragingly, 66% of manufacturers intend to invest in plant and machinery over the next 12 months, mainly to replace aging equipment and improve efficiency. At the same time, about 25% of industrial firms expect challenges in securing export orders, citing intensified overseas price competition and the risk of tariffs amid ongoing global economic uncertainty.

In a separate report, the Department of Statistics Singapore noted that the services sector is facing a slightly less favorable outlook, with a net weighted balance of -4% over the same period. The food and beverage and retail industries are the most pessimistic segments, recording net balances of -40% and -31%, respectively, as fewer festive events and subdued consumer sentiment weigh on demand. Ongoing geopolitical tensions in the Middle East are also expected to dampen tourism flows and overall consumer spending.

An interesting angle often overlooked is how closely Singapore’s manufacturing sentiment tracks global tech cycles. In particular, the semiconductor-driven optimism is tied to booming demand for AI servers and data center chips—meaning that companies in this survey are indirectly “betting” on the continued expansion of artificial intelligence worldwide.