SME sentiment improves for first time in almost 2 years

Singapore Business Federation chief executive Ho Meng Kit. PHOTO: THE BUSINESS TIMES FILE

Business sentiment among smaller firms has improved for the first time in close to two years, according to a new survey.

It also found that expectations for earnings and hiring have also brightened.

The quarterly survey on business sentiment recorded an overall score of 51.9, up 3.8 per cent from the all-time low of 50 recorded in the last quarter.

It was also the first increase in the index score in seven straight quarters.

The survey polled around 3,600 bosses from small and medium-sized enterprises (SMEs) between April and May on their sentiment for the next six months.

Of the six sectors surveyed, sentiment improved the most among the transport or storage sector, which recorded an increase of 2.2 per cent compared with last quarter, followed by business services sentiment score, which went up 1.9 per cent quarter on quarter.

Most sub-indices in the survey conducted by the Singapore Business Federation (SBF) and DP Information Group racked up higher scores, SBF chief executive Ho Meng Kit said.

"The profitability, business expansion and hiring expectation indices saw increases of more than 4 per cent from the previous quarter," he added.

"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."

In terms of profitability, expectations were the highest in the business services, retail and food and beverage sectors.

The business services sector was the most keen to take on more staff, with its hiring expectation score up 8.8 per cent quarter on quarter.

But even as sentiment improved across the board, SMEs are "not out of the woods yet", Mr Ho warned.

"We note that on a year-on-year basis, the SME index is the lowest since we started the index in 2009. Therefore, we remain cautiously optimistic in terms of our outlook," he said, urging SMEs to leverage on the government measures that support financing, training and technology upgrades.

The somewhat-upbeat survey results came as economists polled by the Monetary Authority of Singapore this week trimmed their forecast for economic growth this year from 1.9 per cent to 1.8 per cent.

The United States Federal Reserve has also cut its US growth estimate from 2.2 per cent to 2 per cent.

In China, May's exports slipped 4.1 per cent year on year, suggesting that external demand outlook is still fragile and headwinds yet persist for growth in Asia.

Wong Wei Han

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A version of this article appeared in the print edition of The Straits Times on June 17, 2016, with the headline SME sentiment improves for first time in almost 2 years. Subscribe