Singapore firms turn optimistic as performance declines less sharply in Q1: BT-SUSS poll

SINGAPORE firms have turned optimistic about business prospects in the next six months, as performance declined less severely in the first quarter of 2024, according to the latest quarterly Business Times-Singapore University of Social Sciences (BT-SUSS) Business Climate Survey.

Net balances for the survey’s performance indicators – sales, profits, and orders or new business – stayed in negative territory, indicating continued contraction.

However, the sales net balance was only marginally worse, while the other two saw double-digit improvements.

The net balance is the difference between the share of firms with an increase and those with a decrease in an indicator, compared to the year-ago period. A positive net balance implies expansion and a negative one, contraction.

The survey’s results are consistent with the latest business expectations surveys, which showed that manufacturing and services firms are positive about the period from April to September, said DBS economist Chua Han Teng.

A net weighted balance of 22 per cent of manufacturers expect business to improve in those six months, compared to Q1 2024, according to Economic Development Board data.

Meanwhile, a net weighted balance of 7 per cent of services firms expect a better outlook for the same period, according to the Singapore Department of Statistics.

In the BT-SUSS survey, the sales net balance stayed in contraction for the sixth straight quarter at minus 18 per cent, “little different” from the previous quarter’s minus 16 per cent.

Large firms saw more contraction than small firms, and foreign firms fared worse than local firms.

However, sales net balances improved for all groups of firms compared to a year ago, which “could signal an imminent recovery in sales”, the survey said.

The profits net balance improved for the second straight quarter, rising 15 percentage points to minus 21 per cent. All groups of firms saw profits contract less compared to the previous quarter, as well as the year-ago period.

As for orders or new business, the net balance improved 13 percentage points to minus 20 per cent. Foreign firms were the only group where declines deepened.

Looking up

Overall, firms became slightly optimistic about business prospects for the next six months, compared to the previous quarter. The net balance for business prospects gained 13 percentage points, reaching 3 per cent. All groups of firms had positive net balances in the single digits.

In Q1, business conditions were weaker abroad than in Singapore. Sales contracted more in overseas markets, as did orders or new business.

This is consistent with weaker export performance in Q1, with non-oil domestic exports falling 3.4 per cent, said Maybank regional co-head of macro research Chua Hak Bin.

In contrast, services growth was boosted by stronger domestic conditions, with higher tourist arrivals and high-profile events such as Taylor Swift’s concerts.

But Dr Chua expects stronger export demand in the coming quarters, as the rising demand for electronics broadens to more segments. This will turn export growth positive, he said.

Accelerated growth

As reported earlier, Singapore’s economy grew 2.7 per cent in Q1 2024, faster than the previous quarter’s 2.2 per cent rate, according to official advance estimates.

The survey consultants expect Q2 gross domestic product growth of between 3 and 3.3 per cent. This is only slightly higher than the preceding quarter “in view of continued political conflicts and impact of severe weather”.

This is in line with Maybank’s Q2 growth estimate of 3 per cent. But Maybank expects the Q1 growth figure to be downgraded to 2.2 per cent, after weaker-than-expected manufacturing performance in March.

Singapore’s factory output reversed into negative territory in March, contracting 9.2 per cent year on year on double-digit declines in the electronics and biomedical clusters.

In contrast, DBS’ Chua felt that the consultants’ Q2 estimate is optimistic, saying: “In our view, Singapore’s external-led growth recovery still faces global uncertainties, such as ongoing geopolitical tensions that could disrupt supply chains, and economic policy uncertainty, such as the timing and extent of potential United States interest rate cuts.”

Timely payments?

Among the various sectors, construction was the top performer for the third straight quarter – though it took 11.5 out of 20 top positions, fewer than in the previous poll.

It was overall top for sales, orders or new business, and business prospects, but lost the top spot in profits to the financial and business services sector.

Separately, the survey asked firms how quickly they received payments from clients in 2023.

For slightly over half of respondents, the fastest payments came in within a month. For another 41 per cent, the fastest payments arrived in two to three months.

As for slowest payments, just under one-third of firms received these within four to six months. A quarter of firms received payments only after a year or more.

Firms were also asked if they faced a credit crunch in 2023. Three-quarters of the firms did not, but 7 per cent faced credit crunch more than thrice. Manufacturing firms were most affected, with 14 per cent having a credit crunch more than thrice.

Comparing 2023 and 2022, 64 per cent of respondents saw similar payment schedules. Payment schedules worsened for 21 per cent, but improved for 15 per cent.

By sector, the fastest payments were seen in wholesale and retail trade. In contrast, construction was the only sector where the fastest payments still took more than a year.

Suffering most from slow payments was the financial and business services sector, with four in 10 firms receiving overdue payment beyond a year.

Conducted from Mar 11 to Apr 11 this year, the survey covered the performance of firms in Q1 and their outlook for April to September, compared to the year-ago period.