SME business confidence dips for third consecutive quarter to lowest since 2013

SINGAPORE - The business outlook among SMEs has fallen for a third consecutive quarter, according to the latest survey by the Singapore Business Federation (SBF) and DP Information Group.

The two produce the SBF-DP SME Index whose overall score for the second half of 2015 fell from 54.0 to 53.5 - its lowest level since the start of 2013.

The index measures the business sentiment of SMEs for the next six months. Some 3,600 SMEs were interviewed.

Mr Lincoln Teo, chief operating officer of DP Info, said SMEs are less optimistic but have yet to sink into pessimism.

"While optimism is declining, this is most likely due to an absence of good news than any particular piece of bad news," he said.

"We believe that despite demand, hiring pressures have forced some SMEs to cut back their capacity, resulting in a moderation of expectations for the next two quarters," he said.

Four of the six industries included in the iIndex - commerce/trading, manufacturing, retail/f&b, and transport/storage - were all less optimistic than they were three months ago, while for business services companies, the outlook remains the same.

Only the construction sector bucked the trend with a slight increase in its index score from 53.6 to 54.0.

"The Government's sustained push on productivity and lifelong learning is underpinning the confidence of the services sector," said Mr Teo. "And the commitment to infrastructure development is boosting sentiment among construction firms."

Other indicators measured by the index have also fallen, reflecting the general dip in SME confidence. Compared to the previous quarter:

• Turnover outlook is down from a score of 5.57 to 5.55

• Profitability outlook is down from a score of 5.47 to 5.44

• Business expansion outlook is down from a score of 6.08 to 5.94

• Hiring outlook is down from a score of 5.70 to 5.46

• Operational capacity outlook is down from a score of 7.29 to 7.07

• Access to financing outlook remains steady at 5.30

• Capital investment outlook is up from a score of 5.32 to 5.33

Said Mr Ho Meng Kit, CEO of SBF: "There has been a steady decline in business sentiments of our SMEs over the last three quarters, though this drop in sentiment is not alarming. It reflects the uncertainty in the global economy and the tough business environment locally.

"This latest survey, coupled with other findings such as the lower forecast for Singapore 2015 GDP growth and the contraction in overall employment in the first quarter of this year after five years of sustained growth, could be signs that the economy is reacting to our economic restructuring policies. This situation merits closer monitoring to avoid us slipping into economic difficulties."

ann@sph.com.sg