Singapore SMEs sustain expansionary momentum in Q4, led by trade-related sectors: OCBC
It marks the third consecutive quarter of growth, following a year-long contractionary period
SINGAPORE’S small and medium-sized enterprises (SMEs) extended their expansionary streak into the fourth quarter of 2024, according to the latest OCBC SME Index released on Thursday (Jan 9).
This was buoyed by steady recovery in trade-related sectors and an improved operating environment.
The quarterly index, which tracks the business health and performance of SMEs, eased slightly to 50.7 in Q4 from 50.8 in the third quarter – indicating sustained but moderated growth.
This marked the third consecutive quarter of expansion, following a year-long contractionary period that lasted till the first quarter of 2024.
A reading above 50 signals increased business activity compared to a year ago, while a score below 50 indicates a contraction.
The index is compiled from the transactional data of more than 100,000 OCBC SME customers in Singapore, each with annual revenues of up to S$30 million.
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On a year-on-year basis, collections from customers increased by 2.5 per cent, while payments rose marginally by 0.2 per cent.
Trade-related industries drive growth
Trade-related sectors such as transport and logistics, and wholesale trade posted strong performances in Q4, Goh noted.
The transport and logistics index rose to 51.7, driven by strong growth in the logistics segment, where e-commerce and manufacturing demand spurred activity. Overseas collections surged by 9 per cent on year, even as overseas payments declined by 15.5 per cent.
Manufacturing climbed to 50.5, supported by broad-based growth across its segments.
Electronics and semiconductors led the charge, with collections and payments increasing by 22.8 per cent and 30 per cent, respectively, amid a global tech upcycle.
The wholesale trade index edged higher to 51.1, as demand for trade-related services expanded in tandem with improvements in manufacturing and factory output.
Domestic sectors remain steady
Domestically oriented sectors also registered healthy performances, though challenges remain.
The food and beverage sector (F&B) maintained an expansionary reading of 51.1, fuelled by robust growth in wholesale trade (52.4) and modest expansions in retail (51.5) and services (50.6).
However, one in four F&B businesses polled were less optimistic about the next six months.
Labour-intensive sectors such as healthcare and education also faced mounting cost pressures.
Healthcare turned contractionary at 49.7, weighed down by slower growth among the providers. Meanwhile, the education reading dipped to a neutral 50, as early childhood education businesses grappled with higher wages and manpower shortages.
Outlook for 2025
A business outlook poll revealed cautious optimism among business owners.
Nearly half of the 955 respondents expect better business conditions in the next six months, while 37 per cent anticipate no significant change.
However, concerns over cost pressures and geopolitical risks remain top of mind.
In 2025, SMEs are expected to benefit from sustained external demand, particularly in sectors like technology and electronics, as well as easing inflationary pressures, OCBC said.
However, geopolitical uncertainties and global trade tensions could dampen the pace of growth.
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