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SMEs still upbeat for rest of 2018, but caution has crept in due to trade tensions: index

SINGAPORE'S SMEs remain upbeat about their prospects for the second half of this year, but caution has crept in as a result of the ongoing US-China trade disputes.

The latest Singapore Business Federation–DP Info (SBF-DP) SME Index dipped marginally from 51.8 to 51.5, even as it remained in positive territory. A score above 50 indicates an expectation of growth, while a score below 50 signals a possible contraction.

The outlook for SME turnover and profits was stable, with the turnover expectations score remaining the same as last quarter at 5.38, while the profitability expectations score stayed positive from 5.28 to 5.29.

A score above five indicates expectations of an increase, while a score below that indicates possible declines.

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Among the sectors, Business Services had the highest overall index score of 52.3. It also had the highest turnover expectations score at 5.55 and profitability expectations score at 5.51.

The largest improvement in outlook came from the Retail/Food and Beverage (F&B) sector, which saw its index score rise from 51.3 to 52.0. Last quarter, Retail/F&B SMEs were the most bullish about their business expansion and hiring expectations, a combination that indicated an intention to expand their operations.

James Gothard, general manager, credit services & strategy, South-east Asia, Experian, said that the one sector which has been enjoying consistency is Business Services.

"They have topped the rankings for optimism every quarter for the last four years," he noted.

He added that the Retail/F&B sector is one to watch as its outlook is improving faster than the other sectors.

"During the last few quarters, Retail/F&B SMEs have been hiring, making capital investments and gaining easier access to funding. As a stronger economy fuels consumer confidence, these F&B companies have become increasingly positive about their future," Mr Gothard said.

But despite the relatively stable outlook, Ho Meng Kit, CEO of the Singapore Business Federation, said that he had expected the index to improve over the rest of the year instead of remaining flat, as this was "the seasonal trend in the past in view of the year-end festivities".

He said: "Their sentiment was affected by the ongoing trade disputes between the US and China. With both countries ratcheting up measures to impose additional tariffs on imports and possible investment restrictions, this certainly could have the potential to upend the positive sentiment of our SMEs."

He added that despite the looming uncertainties, SMEs should continue to "think long-term, leverage the supportive government economic policies and continue with their efforts to transform their companies to be more innovative and competitive".

More than 3,600 SMEs were surveyed during April and May 2018 on their outlook.

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