SINGAPORE — Business expectations of firms in the services sector dimmed a little for the second half of the year, but hiring in some segments may increase, according to a new report released by the Department of Statistics Singapore on Wednesday (July 31).

The report, which surveyed 1,500 businesses in the services sector, found a slight uptick in firms that expect things to get worse over the next six months — from 11 per cent three months ago, to 12 per cent now. And 14 per cent of firms expect things to improve, down a tad from 15 per cent three months ago. The rest expect conditions to remain the same.

The Business Expectations (Services Sector) report is published every three months. It looks at general business expectations for the six months ahead, but on specific questions such as hiring and business receipts, it looks at expectations for the quarter.

CIMB Private Banking economist Song Seng Wun said that the slightly weaker outlook comes as no surprise given the ongoing trade war between the United States and China. 

“We are a small open economy, and so the sectors that are more exposed to the external demand and sentiment are naturally more vulnerable and worried about where they will be selling their goods and services,” he said.

Despite the modest slide in sentiment, most industries within the services sector still expect a rise in operating receipts over the current third quarter. They also anticipate an increase in hiring activity over that period.

SOME INDUSTRIES REMAIN OPTIMISTIC, OTHERS LESS SO

While the overall business outlook for the services sector has dimmed slightly, some industries in the sector remain optimistic for the second half of the year. They include:

• Food and beverage 

• Accommodation 

• Information and communications 

• Transport and storage 

The positive outlook among accommodation and food and beverage firms can be attributed in part to the upcoming year-end festivities, which are expected to bring in better business. Similarly, the hotel industry is also expecting to usher in a busier period with the upcoming Formula One Grand Prix night race in September, the report said.

Firms engaged in computer programming and consultancy services as well as web portal services also expect favourable business conditions.

On the other hand, sentiment in some industries has weakened a little for the second half of 2019. They include:

• Retail firms

• Wholesale trade firms

• Financial and insurance firms

The report said wholesalers, banks and finance companies expect the US-China trade conflict "to have a negative impact on their businesses".

OPERATING RECEIPTS AND EMPLOYMENT

The survey found that most industries are quite upbeat over the prospect of better operating receipts and hiring for the six months ahead. They include:

• Accommodation firms

• Food and beverage services firms

• Real estate firms

But the retail industry, in particular, is expecting lower turnover over the third quarter.

Most industries expect an increase in hiring activity in the quarter, but again the main exception is the retail industry, which expects to do less hiring.

Ms Selena Ling, OCBC Bank’s head of treasury research and strategy, said retail has been facing challenges for some time.

“While consumers will be a little more restrained going forward given the negative news headlines from the protracted US-China trade tensions and poor growth data, the structural challenges that we see ongoing in the retail sector, lack of manpower, high rentals, competition with online ecommerce players, are familiar challenges,” she said.

Ms Ling added that while the services sector will provide some buffer in the near future, the global economic downturn may continue to affect the sector if consumers become more cautious.