Quarterly survey finds business sentiment at three-year high

Singapore

BUSINESS sentiment in Singapore is at its most upbeat in three years, with the service and manufacturing sectors showing the most optimism about the coming third quarter, according to the latest Singapore Commercial Credit Bureau (SCCB) Business Optimism Index out on Tuesday.

The overall index climbed for the third straight quarter to hit +10.58 percentage points, up from +8.5 percentage points in Q2 2018 and +3.58 percentage points in Q3 2017. This was the highest score since Q3 2015.

The figures represent the net percentage of respondents expecting improvements in the coming quarter compared to the same time last year.

The quarterly study asks 200 business owners and senior executives about their expectations in six business areas such as sales and profits.

For Q3, all six indicators were expansionary, compared to five indicators the previous quarter.

Inventory levels rebounded into positive territory at +16.5 percentage points, from -3.0 percentage points in the previous quarter. Expectations for selling prices and new orders also improved.

Though still positive, sentiments moderated regarding sales volumes (+10.0 percentage points, down from +13.0 percentage points), net profits (+7.5 percentage points, down from +12.5 percentage points) and employment levels (+9.0 percentage points, down from +10.5 percentage points).

On a year-on-year basis, however, all six indicators showed improvement compared to sentiments about the third quarter of 2017.

"The rise in optimism among the business community should come as no surprise given that the growth rates have remained steady in the first half of 2018," said SCCB chief executive officer Audrey Chia.

This is particularly the case in services and manufacturing, which saw optimism across all six indicators.

In services, this was due largely to an uptick in activity within the business services, recreational and social services sub-sectors.

Four of the six indicators saw improvement compared to a quarter ago. The exceptions were net profits and new orders, which both moderated to +16.44 percentage points, down from +18.57 percentage points and +22.86 percentage points respectively in Q2 2018.

Manufacturing sentiments improved on the back of robust growth within the precision engineering and chemicals sub-segments, with all six indicators strengthening.

The transportation and financial sectors were also upbeat, with five and four indicators in expansionary territory respectively.

The construction sector saw three indicators in the positive zone, up from two in the previous quarter.

Both sales volumes and net profits rebounded from -9.09 percentage points in Q2 2018 to +9.09 percentage points in Q3 2018. However, new orders fell from neutral to negative territory, at -9.09 percentage points.

"While the overall outlook is expected to remain positive, we are also seeing an escalation of global trade tensions which could lead to heightened downside risks and uncertainties," said Ms Chia.

"Sentiments among firms in wholesale trade have slipped for the next quarter. Hence, we would take a cautious stance on the outlook in the near-term."

Wholesale trade saw its second straight quarter of moderation, with only two indicators - new orders and inventory levels - in positive territory. SCCB attributed this to waning growth in global electronics exports.

Sales volumes fell from +12.50 percentage points the previous quarter to 0 percentage point in Q3 2018, while net profit and selling prices fell into negative territory.