SMEs upbeat over outlook: Survey

ST ILLUSTRATION: CHNG CHOON HIONG

Firms expect next two quarters to deliver strongest sales and profit results since 2015

Optimism seems to be on the rise for small and medium-sized enterprises (SMEs), with expectations of strong sales and profit performance in the next two quarters.

A quarterly index that maps business sentiment ticked up from 51.2 to 51.8, signalling an improved outlook for the second and third quarters. A score over 50 indicates growth expectations; one below 50 signals a possible contraction.

The findings showed that all industries recorded overall index scores of above 50, with business services remaining the most optimistic with an overall score of 52.1.

That was closely followed by the commerce and trading sector on 52, and transport and storage with 51.9. These were attributed to improved trading conditions on the back of a stronger global economy.

The other three sectors are manufacturing, retail and food and beverage as well as construction and engineering, which all showed improvements from the previous survey, which is conducted by the Singapore Business Federation (SBF) and DP Information Group (DP Info).

In addition to an overall score, the index includes company turnover and profit expectations, measured on a scale of one to 10.

SMEs expect the next two quarters to deliver their strongest sales and profit results in three years.

  • The Singapore Business Federation-DP Info SME Index scores, by industry, for the next two quarters. A score above 50 indicates an expectation of growth, while a score below 50 signals a possible contraction.

    52.1

    BUSINESS SERVICES SECTOR

    52

    COMMERCE/ TRADING SECTOR

    51.9

    TRANSPORT/ STORAGE SECTOR

    51.7

    MANUFACTURING SECTOR

    51.3

    RETAIL/FOOD & BEVERAGE SECTOR

    50.8

    CONSTRUCTION/ ENGINEERING SECTOR

All six industries expect their turnover to rise during the next six months, lifting the turnover expectations score to 5.38 - the highest score since the third quarter of 2015.

As many SMEs are focused on the domestic market, an expected increase in sales strongly suggests a growing confidence in the Singapore economy, said a joint statement by DP Info and the SBF.

With expectations of increased revenue, the profitability expectations score also rose correspondingly to 5.28, with every sector anticipating an improvement in their bottom lines. This is the best profitability expectations score since the second quarter of 2015.

SMEs' ability to access financing also seems to have picked up, bouncing from a low of under five in the first half of last year to its latest score of 5.26.

Mr James Gothard, regional general manager of credit services and strategy at Experian, DP Info's parent company, noted that the "recovery among SMEs is gaining speed".

"Many SMEs have adjusted their business models, finding greater efficiencies and productivity through investments in technology, or by focusing on aspects of their business with the most potential," he added.

SBF chief executive Ho Meng Kit said it was "good to see" the sentiment of smaller firms improve, but he warned about possible risks. "We are mindful that recent trade disputes between the US and China could affect our growth path," he said. Escalating global trade tensions could affect Singapore as it is a small trade-dependent country.

The SBF-DP Info SME Index is based on a survey of over 3,600 SMEs done in January and February.

A version of this article appeared in the print edition of The Straits Times on March 29, 2018, with the headline 'SMEs upbeat over outlook: Survey'. Print Edition | Subscribe