Receive $80 Grab vouchers valid for use on all Grab services except GrabHitch and GrabShuttle when you subscribe to BT All-Digital at only $0.99*/month.
Find out more at btsub.sg/promo
[SINGAPORE] The global economic recovery - while still uneven - is slowly being felt here, going by the leading indicators of the latest BT-UniSIM Business Climate Survey.
Business activity picked up in the second quarter with better sales and orders made, and profits were unchanged.
The 152 companies that responded to the quarterly survey (in its 19th year) also expressed more optimism about their business prospects in the second half of the year, even as the global economy makes more sure-footed strides.
The survey found, however, that in Q2, companies achieved a better performance overseas than in Singapore across all indicators - whether by sales, orders, or business prospects - regardless of firm type, size or ownership. The performance was better than in Q1.
Neither survey director Chow Kit Boey nor private sector economists were surprised by this. Ms Chow chalked it up to recent improvements in the US economy, which has been shown in past studies on business cycles to have an impact on Singapore directly and indirectly.
She noted that in Q1, the US had severe weather affecting its economic performance; in Q2, it bounced back to grow 4 per cent - much better than earlier estimates.
Apart from the US, regional economies such as China and India have seen an improvement in industrial activity.
Experts pointed out that business activity was relatively weak in Singapore as a result of rising business costs and the tight labour market.
CIMB economist Song Seng Wun, who said the softening of visitor-arrival numbers in Singapore had hurt hospitality-related industries, added: "Poor stockmarket sentiment didn't help either."
Mizuho economist Vishnu Varathan said the loan curbs could have weighed on companies' business activity at home: "Lagged effects of credit tightening for mortgages and car loans may also be filtering through to ancillary domestic sectors, such as furniture or car grooming."
In line with the findings of the Economic Development Board and the Department of Statistics' recent business expectations surveys, the BT-UniSIM Business Climate Survey showed a brightening business outlook for the next six months among companies.
Thanks to more definitive signs of faster growth in the world's major economies, the business prospects net balance - the difference between the proportion of sanguine versus pessimistic responses - stood at 4 per cent in Q2, against one per cent in the previous quarter.
Among the most confident are companies in manufacturing and transport & communications; these two sectors also performed the best in Q2.
Mr Song said: "There's a belief that things will get busier on the back of improving external demand, especially from developed economies. Changi Airport may have seen slower growth in passengers handled, but freight is recovering."
Ms Chow said logistics activities are expanding due to the growing e-commerce space, which augurs well for businesses in the transport & communications sector.
The findings of the survey, carried out between mid-June and mid-July, showed that sales and orders contracted less in Q2. The net balance for sales stood at -7 per cent (an increase of 3 percentage points), -21 per cent for profits (unchanged) and -3 per cent for orders/new business (a rise of 3 percentage points).
The above indicators tracked by the survey have been found to correlate to economic growth in the history of this survey; the business prospects indicator, lagging by a quarter, has shown the closest correlation to gross domestic product (GDP) growth rates.
The survey now predicts 4.4-5 per cent growth in Q3 GDP year-on-year - significantly higher than the consensus estimate of 3.9 per cent. The report with the survey, in analysing the figures, put 2014's GDP growth to be likely between 4 and 4.6 per cent - above both official and market forecasts of 2-4 per cent and 3.7 per cent respectively.
UOB economist Francis Tan described the survey's Q3 growth estimate as being "a little bit on the high side", given the high base recorded in the second half of last year, when GDP growth stood at 4.9 per cent year-on-year.
Mr Varathan said: "We estimate 4.1 per cent GDP growth in Q3, and 3.8 per cent for the full year. Admittedly, we're not as optimistic as the (BT-UniSIM) survey, but I'm inclined to agree with the direction of data surprise - (there could be) upside in store."
Economy watchers widely expect Prime Minister Lee Hsien Loong to narrow the government's full-year GDP forecast in his National Day Message this evening, but were divided on what the new range would be.
Mr Varathan said it will be tightened to 2-3.5 per cent; CIMB's Mr Song reckoned 2.5-3.5 per cent was likely, while UOB's Mr Tan said he was anticipating 3-4 per cent. Still, all three economists identified constraints to growth in the months ahead - these include domestic headwinds from restructuring and credit pressures as well as geopolitical risks - whether from military warfare or disease outbreaks.