SMEs cautiously optimistic for H2, though gloomier than past years: Survey

Turnover and profitability expectations improved most quarter on quarter, with the latter turning from pessimism to optimism.
Turnover and profitability expectations improved most quarter on quarter, with the latter turning from pessimism to optimism.ST PHOTO: KELVIN CHNG

SINGAPORE - Small and medium-sized enterprises (SMEs) here are cautiously optimistic about the third and fourth quarters of 2019 - though gloomier than they have been about any other second half in recent years, according to a quarterly survey.

The SBF-Experian SME Index rose marginally to 50.8 in the latest quarter, from 50.4 the quarter before. A reading above 50 indicates that companies expect business to improve in the next six months, while a reading below 50 indicates that they expect lower business activity.

"The slight rebound in sentiments, buoyed primarily by the retail, F&B (food and beverage) and business services sectors, could be due in part to seasonal effects, such as expectations of the year-end holiday season," said Singapore Business Federation (SBF) chief executive officer Ho Meng Kit.

Despite the marginal rise, the latest figure was down 1.95 per cent year on year, and marked the lowest reading for the third and fourth quarters since the survey began in 2010.

Noting that the trade war between the United States and China has hit Singapore's factory orders and exports, Mr Ho added: "Our businesses should not pin their hopes on a resolution in the trade war anytime soon as the current trade tensions are fuelled by underlying problems that run deep. Business sentiment therefore could deteriorate further."

A joint initiative of the SBF and Experian, the latest edition surveyed 3,600 SMEs from April 15 to May 24 about their expectations for July till December.

Expectations were up quarter on quarter, but lower year on year for five of the seven measures on which firms were surveyed: turnover, profitability, business expansion, hiring and capacity utilisation.

 
 
 

Turnover and profitability expectations improved most quarter on quarter, with the latter turning from pessimism to optimism.

The uptick in sentiment might be because SMEs "are planning to take advantage of Budget 2019 measures and the upcoming holiday spending season", said Experian Southeast Asia general manager for credit services and strategy James Gothard.

Expectations for capital investment improved marginally both quarter on quarter and year on year, while expectations for access to financing were down in both comparisons.

Of six industry sectors, overall sentiment improved in all except commerce and trading. SMEs in that sector continue to be pessimistic about profitability. Their investment expectations also eased to the lowest reading in almost seven years, "highlighting growing concerns of the sector over the protracted trade war", said SBF and Experian.

"SBF remains open and ready to extend a helping hand to businesses affected by the trade war," said Mr Ho, urging SMEs to focus on upgrading, training, transformation and diversification during these uncertain times.