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SMEs upbeat on H1 business prospects: poll

But they indicate lower likelihood of increasing staff strength

[SINGAPORE] Small and medium-sized enterprises (SMEs) here are expecting to start the new year on a bright note, citing upbeat growth expectations for turnover and profit in the first half of this year, even though fewer are looking to increase headcount, a new study revealed.

The latest SME Index study, conducted by the Singapore Business Federation (SBF) and business information bureau DP Information Group, generated a six-month forward-looking index that reflects the sentiments of SMEs for January-June 2014.

It is based on around 3,000 interviews with SME owners and managers operating in five sectors: business services; commerce and trading; construction and engineering; manufacturing; and transport and storage.

The index score for overall growth expectations in turnover was 5.68, up from 5.60 in the previous study released in October 2013. In terms of profit growth, the index was at 5.48, compared with 5.39 previously.

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But SMEs said that they were less likely to increase staff strength for the next six months. The index score for hiring expectations fell to 5.55 from 5.69 previously.

Overall, the SBF-DP SME index rose 0.5 per cent from 54.7 in the previous study to 55 - in what is the highest score recorded for business optimism in three years. SBF and DP said that a score above 50 indicates that SMEs are positive about business prospects for the coming six months.

"SMEs expect the global economy to continue to grow, albeit at a modest pace," said Chen Yew Nah, managing director of DP Information Group. "They expect their sales and profits to improve, and their businesses to expand during the next six months."

Indeed, the index score registered for business expansion was 6.16, a significant increase from the previous study's 6.06 reading.

Ms Chen noted that SMEs expect to be less active in making new hires partly because of the adjustment to a tighter labour market, where they have to compete to get the best talent and at the same time, work on productivity improvements to reduce dependence on labour.

Of the five sectors, the construction and engineering sector was the only one that had moderated overall expectations, from 57.4 in the last study to 55.3 for the first half of this year.

Aside from relatively reduced private-sector activity this year, construction companies may take on fewer projects given the increase in manpower constraints, an SBF and DP spokesman told The Business Times.

The commerce and trading sector is the most optimistic, with overall expectations rising from 55.1 in the last study to 56.1 for the coming six months.

"The commerce and trading sector is driven largely from general positive regional outlook and performance, particularly in countries such as Malaysia and Indonesia," said the spokesman, adding that SMEs' positive outlook for 2014 was largely in line with expectations.

Said SBF CEO Ho Meng Kit: "SMEs should seize this opportunity of growth by strengthening their competitiveness through innovation and internationalisation. As inflationary pressure remains high, small businesses are looking to policymakers to introduce measures to rein in rising business cost and tight labour constraints."