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BUSINESS sentiment in Singapore soured rapidly in Q4 2014, as sales, profits and orders took a turn for the worse. Pessimism among companies spiked to its highest since Q3 2012, said the latest Business Times-UniSIM Business Climate Survey, which paints a gloomier picture than official surveys and predicts that GDP could slow further or even stagnate in Q1 this year.
Of the 179 firms polled in December 2014 and January 2015, 50 per cent expect business prospects to worsen over the next six months, up from 38 per cent in the previous quarter's survey. Meanwhile, the proportion of firms expecting improved business conditions fell to 21 per cent, from 29 per cent a quarter earlier.
The business prospects net balance - a weighted diffusion index that takes the difference between the proportion of positive and negative firms - tumbled 25 points to -27 per cent, the largest drop the quarterly survey has seen since Q2 2012.
This compares gloomily to the results of the latest official business expectations surveys - also negative, but much milder.
A net weighted balance of 4 per cent of firms in services expect less favourable business conditions from January to June, but the Department of Statistics attributed this in part to seasonal effects after the boost that services tend to enjoy with year-end holidays and festive season. And a net weighted balance of 3 per cent of manufacturers are negative, according to the Economic Development Board's survey.
But the BT-UniSIM Business Climate Survey's sentiment report was the natural outcome of what respondents were saying about how their businesses fared in Q4 2014.
Business activity was far weaker compared to a quarter ago, wiping out gains chalked up over the past five quarters, the survey showed.
The sales net balance fell 22 points to -27 per cent in Q4, with foreign firms based here worst hit by declining sales. Close to a fifth of companies reported a greater than 25 per cent drop in sales.
The measure for orders of new business activity did not provide much to look forward to either, falling 19 points to -23 per cent in Q4. About one fifth of firms described orders as being "much lower".
And though the decline in profits was not as sharp - a five-point drop in the net balance to -23 per cent - a third of firms reported that their profits fell by more than 10 per cent for the quarter.
The survey also showed that while business conditions in both overseas and domestic markets were gloomier in Q4, the Singapore market has weakened to a greater extent than markets abroad, survey director Chow Kit Boey said.
"The structural changes in the domestic economy and constantly erupting external shocks are major factors prolonging the current contractionary phase of the business cycle," Ms Chow said.
The net balances indicators, lagged a quarter, have tracked GDP growth closely over the survey's 20-year history. They now imply that Singapore's growth would be anaemic in Q1, or even contract slightly, Ms Chow said.
A regression analysis of the indicators predicts Q1 growth of between -0.5 per cent and 0.9 per cent, much bleaker than the Bloomberg consensus forecast of 2.6 per cent. This is based on the official advance estimate for Q4 GDP of 1.5 per cent.
But economists are expecting the Ministry of Trade and Industry to revise this upwards when it releases final GDP figures on Tuesday morning, because manufacturing output contracted less than initially thought in December.
Economists polled by Bloomberg now hold a median forecast of 1.7 per cent year-on-year growth for Q4 GDP. Some believe this could push growth for the full year up to 2.9 or 3 per cent, from the advance estimate of 2.8 per cent.