Q3 business outlook ticks up after falls in 3 straight quarters

Singapore

A BUOYANT services sector helped to offset trade-war uncertainties - and to support improved business sentiment, says the latest Business Optimism Index by the Singapore Commercial Credit Bureau (SCCB).

Business sentiment among Singapore firms edged up slightly for the first time after three consecutive quarters of decline. Sentiment came in at +6.91 percentage points for Q3 2019, up from +5.08 percentage points in Q2.

Looking at Q3 year on year, however, the index lost ground: The figure for Q3 2018 was +10.58 percentage points.

Sentiment in five of the six indicators used for the index was more positive in Q3 2019 than the quarter before. The five indicators are sales, profits, employment, new orders and inventories.

Only selling price fell between Q2 and Q3 - to -7.32 percentage points from four percentage points.

Year on year for Q3, only net profit and employment went up.

Figures for the index came from polling 200 business owners and senior executives representing Singapore's major industry sectors, and were calculated by subtracting the percentage of respondents expecting decreases from the percentage expecting increases.

The services sector was the most optimistic; it tracked the overall index, with the same five indicators going up and selling price falling.

Audrey Chia, chief executive of SCCB, said that in particular, domestic-oriented service-sector firms in health, education and social services remained resilient.

"Given Singapore's strong fiscal and financial buffers, it is expected that the effects of potential negative shocks of the trade tension between the US and China will also be kept at bay in the near-term."

While sentiment in the services sector was better off overall, CIMB Private Banking economist Song Seng Wun said sub-sectors dealing with external demand, such as logistics, shipping and insurance would not escape the effects of the trade war.

Agreeing with Ms Chia, he noted domestic services are better insulated; in particular, those that are part of digitisation and digitalisation efforts, such as electronic payments and cyber security, will continue to reap the rewards of Singapore's Smart Nation initiative.

Coming in second to the services sector was the financial services sector, with four indicators in positive territory, but it still lost ground in four out of six indicators.

Construction saw numbers dip for three indicators; transportation and manufacturing had figures falling for five indicators.

SCCB attributed the transportation slowdown to contraction in the water transport segment; manufacturing suffered from a tepid semiconductors sub-segment.

Ms Chia said the bureau is cautious for the next quarter despite the slight sentiment rebound due to mounting downside economic risks from the ongoing US-China trade tensions, and an uncertain global growth outlook.

If key trading partners' tensions worsen, overall business cash flows will slow in a protracted trade war, and everyone will be vulnerable, said Mr Song.