LOCAL firms in Singapore are increasingly more pessimistic, depressing a widely-followed optimism index into a contractionary zone for the first time in three years after it took a turn for the worse in the fourth quarter of 2015.
According to Singapore Commercial Credit Bureau's (SCCB) latest quarterly Business Optimism Index (BOI) study, BOI hit a historical low as it fell into negative territory of -2.93 percentage points for Q1 2016, from +0.14 percentage points for Q4 2015.
On a year-on-year (y-o-y) basis, BOI slid from +1.11 percentage points for Q1 2015 to -2.93 percentage points for Q1 2016.
"We are seeing greater pessimism among local firms due primarily to constrained consumer demand globally as well as prolonged weakness and flat growth seen in sectors such as manufacturing and wholesale for the most of 2015,'' said Audrey Chia, SCCB's chief executive officer.
She added that optimism levels will remain muted for the months ahead. According to SCCB, 90 per cent of the local firms surveyed had anticipated investments for business expansion to remain unchanged. This was up from last year when 81 per cent of local firms expected investments to remain unchanged.
For Q1 2016, only one of six business indicators is in positive territory compared with two of six indicators in Q4 2015. With the exception of selling price, the remaining indicators - volume of sales, net profits, employment, inventory levels and new orders - are contractionary.
The services sector emerged as the most optimistic sector in terms of its Q1 2016 outlook. Next was the transportation sector, given the upturn in the air and land transport segments.
However, business confidence within the construction sector has taken a turn for the worse after emerging as one of the least optimistic sectors for Q4 2015. The weaker showing was largely attributed to muted public building activities. New orders within the construction sector are expected to be contractionary for Q1 2016 at -8.33 percentage points.
As with the previous quarter, the manufacturing sector emerged as the least optimistic sectors with all six business indicators in the contractionary region. This was largely due to a sustained decline in manufacturing output, most notably in the transport engineering, electronics and precision engineering segments. New orders fell to a historical low, from -22.22 percentage points for Q4 2015 to -56.0 percentage points for Q1 2016.