SMEs in expansionary territory for seventh straight quarter: OCBC
Ilyas Salim
LOCAL small and medium-sized enterprises (SMEs) have been expanding thanks to a healthy pick-up in consumer demand and international air travel, according to the OCBC SME Index released on Wednesday (Oct 19).
For the third quarter of 2022, the SME index came in at 51.9, marking seven consecutive quarters of expansion. A score above 50 signifies improved health, while a score of below 50 shows a deterioration relative to the same period a year ago.
“The expansion was broad-based across almost all industries and marked seven consecutive quarters for SMEs in positive territory since Q1 2021,” said Linus Goh, OCBC’s head of global commercial banking.
At the same time, the bank warned that business sentiment would continue to be weighed down by concerns over rising inflationary pressures, especially in energy and transport costs going forward.
The Q3 2022 gross domestic product (GDP) Nowcast was reported at 4.6 per cent, maintaining the growth rate from the last quarter, which came in at 4.5 per cent. The reading estimates GDP using the latest OCBC SME Index, and is aligned with advanced estimates of 4.4 per cent released by the Ministry of Trade and Industry.
Positive readings in Q3 were observed across all industries except for the information, communications and technology (ICT) sector. The business services and manufacturing sectors, in particular, continued to see strong growth on the back of sustained demand with the reopening of international borders.
A NEWSLETTER FOR YOU
Friday, 8.30 am
SGSME
Get updates on Singapore's SME community, along with profiles, news and tips.
Business services registered growth from 52.8 in Q2 2022 to 53.6 in Q3, aided by steady performance across all segments. The advertising and exhibition segment benefited from the resumption of Mice activities and a strong quarter of events and conventions built around the F1 Singapore Grand Prix. The segment grew from 53.7 in Q2 to 54.2 in Q3.
The food and beverage (F&B) sector also continued to rebound strongly from the effects of heightened pandemic alert measures implemented a year ago. The sector was at 52.5 for Q3 2022, an improvement from the contraction of 47.7 in Q1. SMEs in the F&B services segment gained from the jump in tourist arrivals, with the expansion to 56.3 on the index and outweighing the contraction in the F&B wholesale trade (49.6) and F&B retail (49.2) segments.
Other consumer-facing services sectors such as healthcare, education and retail also expanded with the boost in domestic spending.
Meanwhile, ICT went into contractionary territory for the first time since Q1 2022, and was the only sector that scored below 50. Collections for the sector, which registered 49.4 on the index, also declined by 3.5 per cent quarter on quarter. Persisting global chip shortages and supply chain uncertainties continued to hinder growth for the segment, affecting ICT manufacturing and sales especially, which slipped from 50.6 in Q2 2022 to 48.5 in Q3 this year.
Growth in transport and logistics continued, albeit at a slower pace after six consecutive quarters of robust performance. The segment scored 50.1 in Q3, down from 52 in Q2. The moderation in growth since the last quarter was attributed to a slowdown in the logistics segment, as well as dampened demand for transport and logistics services due to higher costs.
OCBC is expecting its SME Index to moderate downwards in Q4 but remain slightly expansionary, with growing downside risks arising from the softening in global and regional demand, persistent inflationary pressures especially in energy and manpower costs, and rising interest rates.
The index is derived using the SME transactional data of over 100,000 OCBC SME customers in Singapore with annual sales turnover of up to S$30 million. It also uses indicators such as sales collections, payments, cash flow and operating transactions of the SMEs with OCBC.
Copyright SPH Media. All rights reserved.
