Firms stay cautious; Q1 2017 growth to be similar to Q4 2016

Singapore

BUSINESS performance improved for firms here in the last quarter of 2016, but they remained highly cautious about prospects soon, a survey has found.

This cautiousness - the first in five quarters - would translate into a Q1 2017 growth rate similar to the pace seen at the end of 2016.

The latest Business Times-UniSim survey results found that sales, profits and new businesses for companies here continued on their upward trajectory for the third consecutive quarter in Q4 2016.

These three indicators saw their net balances - or the gap between the percentage of better-performing respondents and those worse off - still mired in negative territory in Q4 2016.

But these balances are yet an improvement from Q3 2016. Sales saw an improvement of four percentage points, while profits and new businesses increased by five.

Taken together, they signal improving conditions in these three indicators since Q1 2016, though sales and new businesses showed no change in Q3 2016.

However, when asked about their prospects for the next six months till June this year, respondents were as downbeat as before - the "sentiment" net balance for Q4 was at minus 48 per cent, the same as in Q3.

This stagnation is notable, considering that sentiment had been improving since Q4 2015, albeit still somewhat pessimistic - the negative balances for business prospects had been narrowing.

A total of 188 firms responded to the quarterly survey for Q4 2016, which was conducted by consultant Chow Kit Boey.

They were polled between Dec 9 last year and Jan 13 this year. This was after US business mogul Donald Trump claimed victory in the presidential election - something not captured in the previous quarter's results.

Regression analyses from the survey indicators yielded a Q1 2017 growth forecast of between 1.8 per cent and 2.2 per cent.

Official flash estimates put Q4 2016 growth at 1.8 per cent. But the growth is likely to be higher, given that December's factory output, which was not fully captured in the early estimate, far exceeded expectations. The full quarter figures will be available later this month.

While the overall figures show no change in business sentiment from Q3 to Q4, a breakdown of the responses reveals the divergences across industry and sector.

Notably, small and local firms had turned decidedly more pessimistic.

A balance of minus 65 per cent of small firms said in Q4 that the situation would worsen. This is a larger proportion than Q3's minus 47 per cent.

Local firms also reported a worse balance of minus 52 per cent as compared to the minus 47 per cent when polled in Q3.

Large firms and foreign ones saw improvements in their balances.

And even though the net balance for business prospects was unchanged, there were more respondents who thought the situation in the coming six months would be much worse. This was affected by the increased pessimism among small firms.

Some 19 per cent said prospects will be "much worse", compared to 15 per cent the previous quarter. Forty-five per cent said it will be "worse", against 49 per cent in Q3.

The proportion who thought that it will be unchanged stands at 21 per cent, compared to 24 per cent previously. About 15 per cent felt the situation will be "better", compared to 12 per cent earlier.

No respondents thought that the situation will be "much better", as compared to the 1 per cent who thought so in Q3.

Manufacturing firms, regardless of size and ownership origin, were the most upbeat about the months ahead; firms from this sector had the highest net balances for business prospects.