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SMEs turning even less bullish

Sentiment down five quarters in a row, hitting lows last seen in 2012

Sentiment among small and medium-sized enterprises (SMEs) has fallen for the fifth straight quarter, to hit lows last seen in 2012, according to the latest SBF-DP SME Index.


SENTIMENT among small and medium-sized enterprises (SMEs) has fallen for the fifth straight quarter, to hit lows last seen in 2012, according to the latest SBF-DP SME Index.

It is also the first time - since the index was introduced in 2010 - that all the major components (including turnover and profit expectations, and business expansion expectations) that make up the index recorded a lower reading.

The index, which is a joint initiative of the Singapore Business Federation (SBF) and DP Information, measures the business sentiment of SMEs for the next six months. An index reading of 50 indicates SMEs are neutral about their prospects and expect to achieve no substantial growth for the coming two quarters.

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SBF chief executive officer Ho Meng Kit called the five straight quarters of falling sentiment "a worrying trend" and said that SMEs need to jolt themselves out of a stagnation mindset.

"With the recent emphasis on value creation, it is no longer possible for businesses to continue adopting the same business models that had brought us growth in the past. The government and business community need to work together to develop a new paradigm where there is greater collaboration, leveraging each other's strengths to build Singapore's future economy, particularly in the midst of increasing volatility and uncertainty."

Sentiment fell across five of the six sectors tracked - commerce/trading, manufacturing, retail/F&B, business services, and transport/storage. The construction/engineering sector's index reading remained unchanged from the previous quarter at 51.7.

Quarter on quarter, the business services sector experienced a drop in sentiment from 54.8 to 53.5, while sentiment in the manufacturing sector fell from 51.4 to 50.6. The commerce/trading sector's sentiment gauge fell from 51.6 to 51.1.

Across the sectors, manufacturing was the most conservative in its outlook, at 50.6. Retail/F&B was only mildly more optimistic, at 50.9.

The overall index fell 1.5 per cent, from 51.9 to 51.1. This is the lowest level recorded since the index hit 50.8 in Q1 2012.

Separately, all the major components that make up the index recorded a lower reading. Turnover and profitability expectations both hit a new low of 5.22 and 5.08 respectively.

Commerce/trading and retail/F&B sectors both posted the lowest turnover expectations - the former saw their expectations drop from a reading of 5.39 to 5.16, while the retail/F&B sector saw their expectations dip from 5.24 to 5.16.

On the profitability expectations front, the manufacturing sector rated their expectations at 5.00 (from 5.01 the previous quarter). Commerce/trading was only mildly more optimistic at 5.03, from 5.31 the previous quarter.

In line with the subdued outlook, business expansion expectations for the coming six months fell from 5.83 to 5.61 and hiring expectations fell from 5.43 to 5.30.

"The main drivers of any fresh shoots of confidence in the coming quarters will be the Three 'I's - interest rates, innovation and internationalisation," said Lincoln Teo, chief operating officer of DP Info.

SMEs also need to turn to innovation to give them an edge over their competitors and increase productivity.

He added: "Internationalisation should be high on the agenda for SMEs and they need to seek out alternative opportunities outside Singapore."


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