SMEs still upbeat about rest of the year, but trade tensions weigh on sentiment

Singapore

SINGAPORE'S small and medium-sized enterprises (SMEs) remain upbeat about their prospects for the second half of this year, but caution has crept in as a result of the ongoing US-China trade tensions.

The Singapore Business Federation-DP (SBF-DP) Info SME Index dipped marginally from 51.8 to 51.5 in its latest poll, indicating a slight easing of optimism among these smaller businesses. A score of above 50 indicates an expectation of growth, and one below 50, an expected contraction.

Among the six sectors, Business Services had the highest overall index score of 52.3. It also had the highest turnover and profitability expectations scores.

The biggest improvement in outlook came from the Retail/Food and Beverage (F&B) sector, where the index score rose from 51.3 to 52.0. Last quarter, Retail/F&B SMEs were the most bullish about their business expansion and hiring expectations, a combination that indicated an intention to expand their operations. The other sector that showed an improvement in sentiment was Construction/Engineering, which saw its index score inch up from 50.8 to 51.0.

The remaining three sectors - Commerce/Trading, Manufacturing, and Transport/Storage - clocked slight declines in business sentiment.

James Gothard, general manager of credit services and strategy in South-east Asia for consumer credit reporting agency Experian, said Business Services has been the most consistent among the sectors.

"It has topped the rankings for optimism every quarter for the last four years." This sector is one to watch, as its outlook is improving faster than the other sectors, he added.

"During the last few quarters, Retail/F&B SMEs have been hiring, making capital investments and gaining easier access to funding. As a stronger economy fuels consumer confidence, these F&B companies have become increasingly positive about their future," he said.

But despite the relatively stable outlook, the SBF's chief executive Ho Meng Kit said he had expected the index to improve instead of remaining flat, as this has been the trend as the calendar heads towards the year-end festivities. He said of business sentiment being hit by the ongoing trade disputes between the US and China: "With both countries ratcheting up measures to impose additional tariffs on imports and possible investment restrictions, this could upend the positive sentiment of the country's SMEs."

He added that despite the looming uncertainties, SMEs should continue to "think long-term, leverage the supportive government economic policies and continue with their efforts to transform their companies to be more innovative and competitive".

More than 3,600 SMEs were surveyed in April and May on their outlook.