Singapore business sentiment recovers in Q2, outlook still cautious: SBF poll

[SINGAPORE] Business confidence improved slightly in the second quarter, as cost pressures were not as bad as earlier feared, indicated a poll released on Monday (Aug 17).

The Singapore Business Federation (SBF) reported a two-point improvement in its quarterly Business Sentiment Index, to 53.3 points for the period from April to June.

Still, the reading indicates a neutral sentiment overall, with limited business expansion.

The recovery in business sentiment almost fully reverses the 2.1 point dip logged in the first quarter. SBF attributed the latest outlook to support from resilient domestic growth, artificial intelligence investment and a more moderate fallout from conflict in the Middle East.

Business sentiment rose broadly across the board, with SBF noting improved confidence among both small and medium-sized enterprises and large companies in its July survey.

Banking and insurance, health and social services, and other financial and insurance industries were among the most upbeat market players. Retail trade, education and wholesale trade companies were the least optimistic.

Turning around from the quarter prior, the real estate, manufacturing, wholesale trade, and information technology (IT) and related services industries also posted positive readings.

But firms in professional services, logistics and transportation, hotels, restaurants and accommodation, and education were less positive than in the quarter before.

The poll of more than 500 businesses showed that an initial price shock in the first quarter – the result of energy disruptions amid Middle East tensions – may now be moderating.

SEE ALSO

AI boom prompts economists to lift 2026 growth forecasts beyond MTI’s upgraded 4.5-5.5% range

Iran conflict has hit inflation more than growth; MAS says any growth drag will be outweighed by AI boost

The cost expectations index stood at 71.2 points, down from 75.9 before, thanks to expectations of lower cost pressures for the hotels, restaurants and accommodations, IT and related services, and banking and insurance industries. In contrast, real estate and retail trade registered higher cost expectations compared with the quarter before.

Still, SBF said: “Cost expectations remain elevated, as businesses continued to anticipate pressures from higher energy prices, and rising material and supply chain costs.”

Meanwhile, the hiring outlook index inched up to 56.3 points, from 55.1 before – pointing to general stability in headcount levels, despite a pause in workforce growth.

Hiring sentiment increased quarter on quarter for real estate, banking and insurance, wholesale trade and professional services, but fell sharply for hotels, restaurants and accommodation. It also dipped for logistics and transportation, and manufacturing, while the report singled out “a notable decline” in IT-related hiring sentiment for two straight quarters.

SBF said that the rebound in business sentiment “was likely supported by resilient economic growth in Singapore”, which recently posted better-than-expected second-quarter gross domestic product growth of 5.9 per cent year on year. 

The report also cited “the absence of further escalation or shipping disruptions in the Gulf”, where the outbreak of hostilities since end-February has snarled maritime traffic.

“However, ongoing energy-market pressures and uncertainty surrounding US trade policy may limit further optimism,” SBF added.

Some 32 per cent of respondents tipped the Singapore economy to worsen in the next 12 months – down from 41 per cent in the SBF’s previous National Business Survey. But 53 per cent expect economic conditions to stay unchanged, compared with 45 per cent before.

The share of companies that are satisfied with the business climate dropped to 29 per cent, from 34 per cent previously, while the neutral cohort rose to 53 per cent, from 45 per cent.