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SME business sentiment slides for third straight quarter

However, they are still marginally optimistic about the outlook for the first six months of 2019

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Business sentiment among Singapore small and medium-sized enterprises (SMEs) eased again for the third straight quarter, even as they remained marginally optimistic about the outlook for the first six months of 2019.

Singapore

BUSINESS sentiment among Singapore small and medium-sized enterprises (SMEs) eased again for the third straight quarter, even as they remained marginally optimistic about the outlook for the first six months of 2019.

The latest Singapore Business Federation (SBF) - DP Info SME Index score fell slightly from 51.0 to 50.7, indicating an increase in caution among the 3,600 SMEs polled in October and November 2018.

But despite the downtrend, a score of above 50 still signals an expectation of growth.

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The sector which showed the biggest decline in sentiment was construction/engineering, followed by retail/food and beverage, and transport/storage.

Turnover expectations by SMEs continued to decline on the back of an uncertain macroeconomic environment, down from 5.22 to 5.13. This directly impacted profitability expectations, which also fell from 5.19 to 5.07.

A score of above five indicates expectations of an increase, while a score below that indicates possible declines.

Among the sectors, construction/engineering, commerce/trading, and manufacturing are anticipating negative profit growth.

The study also showed softer capital investment expectations for the next six months, which fell from 5.21 to 5.16, as SMEs take a wait-and-see approach in view of the murky outlook ahead.

This coincides with companies holding back capital investment commitments ahead of possible changes in government initiatives and schemes in the upcoming Budget 2019, according to the report.

SMEs are still looking for opportunities to grow, even as business expansion expectations dipped from 5.45 to 5.41 for the first half of 2019.

In particular, SMEs in the business services sector and the transport/storage sector are expecting to expand - likely a result of the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), which came into force on Dec 30, 2018, as well as the signing of the Asean e-commerce agreements.

Ho Meng Kit, the chief executive officer of SBF, noted that it was a relief to see that the appetite for business expansion is "still healthy", even as the survey was conducted at the height of the US-China trade tensions.

"Given the ongoing trade tensions and slower economic growth climate, it is even more pertinent that our companies stay nimble and are quick to take advantage of opportunities that may arise from the diversion of trade and re-shuffling of global supply chains," he said.

He said that business should continue to innovate and transform, as well as to tap the extensive network of free trade agreements that Singapore has signed.

James Gothard, general manager, Credit Services & Strategy SEA of Experian, added: "SMEs are likely to look forward to supporting measures announced in Budget 2019 to overcome near-term challenges, as well as enable them to capture future opportunities."