SMEs in expansionary mode for 4 straight quarters: OCBC
THINGS are expected to continue to look up for businesses in the first 3 months of this year, even as challenges remain in the food and beverage (F&B) and building and construction sectors.
According to the OCBC SME Index, the Q4 2021 Index came in at 52.6, marking 4 consecutive quarters of expansion. A reading above 50 indicates improved activity, while below 50 indicates a deterioration relative to the same period a year ago.
The index was at 53.6 in Q3 2021 and at 59.5 in Q2 2021.
"The continued expansion in the OCBC SME Index in Q4 2021 capped a year of sustained recovery for SMEs (small and medium-sized enterprises) in Singapore," said Linus Goh, head of global commercial banking at OCBC Bank.
"Across most industries, SMEs were resilient and delivered healthy year-on-year growth leveraging digitalisation and e-commerce to address supply chain disruptions."
Q4 collections grew by 13 per cent compared to the last quarter, in tandem with the sequential recovery of the economy, said the bank.
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That being said, downside risks that could derail the recovery for SMEs remain. These include any tightening of safe management measures as well as faster-than-expected tightening of monetary policy, which could affect financing costs and cash flow.
The F&B industry specifically registered its second consecutive quarter of contraction (48.9 in Q3 2021 and 47.9 in Q4 2021). The sub-sectors F&B retail and F&B services in particular saw a second consecutive quarter of contraction at 47.8 and 48 respectively.
F&B services saw collections drop year on year due to lower traffic, resulting in deteriorating cash coverage positions. Firms with insufficient cash balances to cover 6 months of operations rose to 35 per cent in Q4, compared to 33 per cent in Q3 and 27 per cent a year ago.
Separately, building and construction slowed to 51.7 in Q4, from 53.8 in Q3.
The construction segment (53.8 in Q3 to 51.5 in Q4) has been bogged down by project delays mainly due to manpower shortages while building materials saw a decline to 51.9 due to rising material prices.
That being said, the industry remained expansionary and collections grew 29 per cent over the same period last year.
On top of supply-side challenges, the industry is likely to see lower demand and sales going forward, with the property cooling measures announced in December.
Elsewhere, manufacturing, wholesale trade, resources, and transport and logistics continued to see robust growth on the back of strong cross-border trade.
Growth in information and communications technology too remained healthy while business services benefited from strong pickup in demand.
The data is derived using the bank's transaction data of over 100,000 SME customers in Singapore with up to S$30 million in annual sales turnover. The index also uses indicators such as sales collections, payments, cash flow and operating transactions.
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