SMEs less bullish about business outlook: study

[SINGAPORE] Small and medium-sized enterprises (SMEs) in industries linked to the international economy are more optimistic about their prospects, though firms are generally less upbeat compared to when they were polled in January.

Business outlook dipped 1.1 per cent to 54.4, according to the latest quarterly SME Index study by the Singapore Business Federation (SBF) and DP Information Group.

This compares with the previous quarter's 55.0, which was the highest score recorded for business optimism in three years.

The SBF-DP SME Index is a six-month forward-looking index that measures the sentiments of SMEs. A score of above 50 indicates that firms have a positive outlook.

Hiring expectations, one of the components of the index, inched down 0.25 of a point to 5.30 from 5.55 previously. Turnover expectations fell to 5.59 from 5.68, and profitability expectations fell to 5.40 from 5.48.

Both turnover and profitability expectation indices posted gains in the first quarter this year.

Of the five industries tracked - business services, commerce/trading, construction/engineering, manufacturing and transport/storage - the latter two were more optimistic about their overall performance in the next six months.

They were also the only two sectors which are more positive about their turnover and profits. The turnover score for the manufacturing sector rose from 5.55 to 5.62, while the profitability score increased from 5.32 to 5.45. For transport/storage, the turnover score increased from 5.47 to 5.51 and the profitability score rose from 5.36 to 5.43.

"Singapore is one of the most open economies in the world, so our SMEs will benefit as trade growth picks up this year and during 2015," said Chen Yew Nah, managing director of DP Info.

The World Trade Organization has predicted that trade growth would rise 4.7 per cent next year and 5.3 per cent in 2015.

While SMEs in the commerce/trading sector had the highest overall index score, their level of optimism dipped from the last quarter. This may reflect the impact of the stronger Singapore dollar, which hit a three-month high at the end of March.

Ho Meng Kit, SBF chief executive, said that domestic-oriented sectors such as the business/services and construction/engineering industries were still hampered by ongoing economic restructuring and the manpower crunch.

"We urge SMEs to make a concerted effort to pursue growth by tapping the recent Budget measures which provide support for innovation, financing, and internationalisation."