Singapore business sentiment remains downbeat but more optimism in manufacturing, financial sectors

BUSINESS sentiment among local firms remains downbeat for the third quarter of this year, but has improved from the previous quarter's record low amid the economy's gradual reopening.

Particularly, the manufacturing and financial services sectors anticipate a slightly better outlook ahead, according to the Singapore Commercial Credit Bureau's (SCCB) latest quarterly survey released on Tuesday.

"With the easing of the 'circuit-breaker' measures and gradual reopening of the economy, we are seeing some silver linings and a slightly improved outlook among firms here. While it is still too early to ascertain if a V-shaped recovery can be expected, there are some signs of green shoots in certain sectors such as manufacturing, professional and IT services," said SCCB chief executive Audrey Chia.

Overall business sentiment remained contractionary for the third quarter with the Business Optimism Index recording -5.16 percentage points, although this was up from the record low of -7.88 percentage points in Q2.

As with the previous quarter, all of the survey's six indicators - sales volumes, net profits, new orders, inventory levels, selling prices and employment - remained contractionary for Q3.

Year on year, the Business Optimism Index fell from +6.91 percentage points in Q3 2019 to -5.16 percentage points in Q3 2020.

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The construction sector held the bleakest outlook with a number of indicators worsening. For instance, that of sales volumes declined to -20.0 percentage points in Q3, from -10.0 percentage points in the previous quarter.

Sentiments towards new orders, inventory and employment levels also fell - each indicator fell to -60.0 percentage points in Q3, from -30.0 percentage points in Q2.

"The outlook for majority of the sectors still remain uncertain with construction emerging as the most downbeat as a result of the temporary halt in construction activities by foreign labour," Ms Chia said.

But sentiments within the manufacturing and financial sectors have improved.

In particular, sentiments within the manufacturing sector improved on all fronts. For instance, the hiring indicator rose from -5.0 percentage points in Q2 to zero percentage point in Q3.

Expectations for new orders and sales volumes also turned positive - new orders rebounded from -10.0 percentage points in Q2 to +11.76 percentage points in Q3. Volume of sales, which recorded -10.0 percentage points in Q2 rose to +29.41 percentage points in Q3.

Still, Ms Chia said: "As it will take some time for firms to return operating at full capacity during pre-Covid-19 times, we foresee that the overall sentiment will remain dampened in the months ahead."

High levels of uncertainty also remain, given the threat of a second wave of infections, continued global social unrest and trade tensions between the US and China, she added.