SMEs less optimistic about business outlook for a third quarter

BUSINESS outlook among small and medium enterprises (SMEs) has fallen for a third consecutive quarter with only the construction sector bucking the trend, over uncertainty in the global economy and tough local business environment, a new study has found.

The latest survey by the Singapore Business Federation (SBF) and DP Information Group found that the SME Index for the second half of this year was down, from 54.0 to 53.5 - its lowest level since the start of 2013.

The SBF-DP Index, which measures the business sentiment of SMEs for the next six months, said only the construction sector bucked the trend with a slight increase in its index score from 53.6 to 54.0. Nearly 3,600 SMEs were interviewed for the survey.

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 (rather) 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."

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

Other indicators measured by the index were also down: turnover outlook down from 5.57 to 5.55, profitability outlook down from 5.47 to 5.44, business expansion outlook down from 6.08 to 5.94 and hiring outlook down from 5.70 to 5.46.

Mr Ho Meng Kit, chief executive of SBF, said the outlook reflects uncertainty in the global economy and tough local business environment.

"This latest survey, coupled with... 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."

A version of this article appeared in the print edition of The Straits Times on June 24, 2015, with the headline 'SMEs less optimistic about business outlook for a third quarter'. Subscribe