Business confidence among local companies has weakened for the second straight quarter, moderating significantly in the new year, according to the latest quarterly Singapore Commercial Credit Bureau's (SCCB) Business Optimism Index released yesterday.

The overall index eased from +9.19 percentage points in this year's fourth quarter, to +7.19 percentage points for the first quarter next year. But against a year ago, this was up from +4.29 percentage points in the first quarter this year.

The figures, derived from a poll of 200 business owners and executives, represent the net percentage of respondents expecting improvements in the coming quarter compared with the same period last year.

Three out of six indicators saw an expansionary first-quarter outlook: selling price, new orders and inventory levels. But the other three indicators - sales volume, net profits and employment levels - slipped on a year-on-year basis. The net profits indicator was the hardest hit, slipping into contraction territory at -2.63 percentage points, against +2.63 percentage points in the first quarter this year.

Compared with the fourth quarter this year, two of the indicators - sales volume and net profits - were lower for next year's first quarter. The other four indicators rose on a quarter-on-quarter basis. The selling price indicator rebounded into the expansionary zone from -0.98 percentage point in the fourth quarter to +6.84 percentage points in next year's first quarter.

Overall, services, transportation and wholesale emerged as the most optimistic sectors, with five indicators showing positive outlook.

Firms were also more optimistic about investments in business expansion for the year ahead.

"This is particularly in the area of technological investments in software, infrastructure and upskilling of employees for ICT (information and communications technology) training programmes," said SCCB's CEO Audrey Chia.

The proportion of companies expecting a rise in investments was up, from 9 per cent in 2018 to 14 per cent in 2019. But the proportion of firms expecting investments to fall also climbed - from 4 per cent in 2018 to 7 per cent in 2019. Most local firms or 79 per cent expected investments to remain unchanged.

Looking ahead, global economic uncertainties were highlighted by 32 per cent of respondents as the main challenge for 2019. Other key challenges include higher business costs (26 per cent) and increased competition (22 per cent).

"Moving into Q1 2019, we expect visible signs of moderation in the outlook for local firms, particularly within the manufacturing sector in light of muted global demand and softer growth within the region," said Ms Chia.

"The services and financial sectors will continue to remain the key sectors for growth... While the construction sector is one of the least optimistic, we are seeing signs of green shoots with the surprising rebound in optimism levels."