SME sentiment edges up for first time in seven consecutive quarters
- Turnover and profits expected to risein second half of the year
- Transport/Storage sector records biggest improvement in sentiment
Singapore, 16 June, 2016 – SME sentiment has inched up for the first time in seven consecutive quarters according to the latest SBF-DP SME Index (the Index). The Overall Index score rose by 1.9 points to 51.9. This comes after the Index hit an all time low of 50.0 in the last quarter.
The Index measures the business sentiment of SMEs for the next six months (Q3 and Q4 of 2016) and is a joint initiative of the Singapore Business Federation (SBF) and DP Information Group (DP Info). More than 3,600 SMEs were surveyed between April and May 2016 on their outlook and sentiment.
A score of 51.9 indicates SMEs are marginally optimistic about their growth prospects in the second half of the year and expect improvements in both their turnover and profits in the next six months.
The Business Services sector is the most optimistic group of SMEs with an Index score of 52.4, up 1.0 point from last quarter. The Transport/Storage sector recorded the biggest improvement in sentiment with their overall index score increasing from 50.8 to 51.9.
Turnover and profitability expectations rose across all six industry sectors. The Turnover Expectations score rose from 5.12 to 5.28, while for profits the score increased from a low 5.04 to 5.27.
There has been an increase in the number of SMEs intending to make capital investments during the next six months as they seek to transform themselves and raise productivity. Capital Investment Expectations rose from 5.26 to 5.39 after consecutive quarters of stagnant growth.
On the back of an anticipated boost in sales, more SMEs are planning to make new hires during the next six months, with hiring expectations improving across all industry sectors. The Hiring Expectations index score rose from 5.23 to 5.47.
Table 1: Outlook for 3Q16 – 4Q16F (July 2016 to December 2016)
Comments from SBF
Mr Ho Meng Kit, CEO of SBF, said “There is a 3.8 per cent increase in the SBF-DP SME Index for 3Q16-4Q16F from the previous quarter. However, we note that on a historical basis, there tends to be an improvement in SME sentiments for 3Q and 4Q.
This is likely to be due to seasonal effects of higher consumption expectations for the year end during the festive season. That said, the increase in the index this time around is also likely to be supported by the stabilising commodity and oil prices, lower volatility in the export markets, and positive expectations from the recently announced measures in the Singapore Budget.”
“This time around, all the expectation indices have increased quarter-on-quarter except the Access to Financing Expectation Index which saw no change. The Profitability, Business Expansion and Hiring Expectation Indices saw increases of more than four per cent from the previous quarter. SMEs are still indicating expansion when it comes to Turnover Expectations, Business Expansion Expectations, Capital Investment Expectations, Hiring Expectations and Capacity Utilisation Expectations. These are good signs as they reflect optimism in the short term shown by SMEs.”
“However, we note that on a year-on-year basis, the SME Index for 3Q16-4Q16F is the lowest since we started the Index in 2009. Therefore, we remain cautiously optimistic in terms of our outlook. We are certainly not out of the woods yet. To remain competitive, businesses should leverage the measures initiated by the Singapore government to assist SMEs through financing, training and technological transformation programmes,” Mr Ho said.
Comments from DP Info
Mr Lincoln Teo, Chief Operating Officer of DP Information Group, said further improvements of SME sentiment will be closely tied to domestic growth and global economic events.
“Last quarter SMEs expected no growth at all. Currently, SMEs still face global economic headwinds in the form of Brexit and possible further rate hikes by the Federal Reserve. Currencies and commodity prices have stabilised over the quarter and this has boosted the outlook for SMEs. There is a muted expectation of modest growth in the months ahead as things have marginally improved."
“The brightest result of this quarter’s Index is that SMEs expect sales and profits to grow during the next six months. Nothing lifts the mood of SME leaders more than seeing a gentle rebound of their top and bottom line.”
“This has given SMEs the confidence they need to make capital investments and create more jobs.”
“Budget initiatives have also contributed to the slightly optimistic outlook among SMEs. Many of the measures announced in the recent budget were aimed at the SME community. The higher corporate income tax rebate and the SME Working Capital Loan will provide welcome relief to companies struggling to remain profitable in the face of higher business operating costs,” Mr Teo said.
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