SME sentiment dips across all industries
- Tougher times expected in first half of 2016
The Index fell to a score of 51.1 – the lowest level recorded since the Index hit 50.8 in 1Q12-2Q12F. An Index reading of 50 indicates SMEs are neutral about their prospects and expect to achieve no substantial growth for the coming two quarters.
The Index measures the business sentiment of SMEs for the next six months and is a joint initiative of the Singapore Business Federation (SBF) and DP Information Group (DP Info). Some 3,600 SMEs were interviewed.
Sentiment fell or remained neutral across all six industries, indicating a weakening outlook across the whole SME sector.
The Index reading fell for Commerce/Trading, Manufacturing, Retail/F&B, Business Services and Transport/Storage sectors while for that of Construction/Engineering remained unchanged from the previous quarter.
TABLE 1: Outlook for 1Q16 – 2Q16F (January 2016 to June 2016)
All major components that make up the Index recorded a lower reading, the first time since the Index was introduced in 2010. SMEs are less optimistic about all aspects of their operations – from hiring through to business expansion to capital investment.
TABLE 2: Quarter-on-Quarter Expectations
Turnover Expectations reading fell to 5.22, which is the lowest ever recorded.
The Profitability Outlook reading also fell to a new record low of 5.08. Five of the six industries indicated declining optimism for their profitability, while the outlook among Construction/Engineering SMEs remaining virtually unchanged.
Comments from SBF
SBF’s Chief Executive Officer, Mr Ho Meng Kit, says that the five straight quarters of falling sentiments is a worrying trend and SMEs need to jolt themselves out of a stagnation mindset.
“With the recent emphasis on value-creation, it is no longer possible for businesses to continue adopting the same business models that had brought us growth in the past. The government and business community need to work together to develop a new paradigm where there is greater collaboration, leveraging each other’s strengths to build Singapore’s future economy, particularly in the midst of increasing volatility and uncertainty.”
“Singapore companies have always been resilient. We have always been able to find new ways of doing things, new markets and novel methods or unchartered paths to offer innovative new products and services that are not available in the market. I urge our SMEs to not let the gloomy global outlook affect their vision. Instead, I encourage them to leverage opportunities that arise from this economic climate and work towards achieving sustained economic growth.”
Comments from DP Info
Mr Lincoln Teo, Chief Operating Officer of DP Info said tough times lie ahead for SMEs in 2016.
“We have had five challenging quarters that have dampened the outlook of Singapore SMEs. The feeling among SMEs is that there may be worse to come. The SBF-DP SME Index shows declining optimism across the board with weakness in all the six industries polled.”
“The sluggish global economy is definitely weighing down the outlook of SMEs. With the island’s industrial production falling and the consumer price index at its lowest in recent memory, demand is weak within the business and consumer space.”
“The main drivers of any fresh shoots of confidence in the coming quarters will be the ‘Three ‘I’s’ - interest rates, innovation and internationalisation.”
“With the recently announced interest rate increase by the Federal Reserve, businesses will be keeping watch over the impact on America – the largest economy in the world, and its subsequent effects on Singapore.”
“Innovation gives SMEs an edge over their competition, helping them cope with the current sluggish economic growth. It can also help them increase their productivity by improving the efficiency of their operations.”
“Internationalisation should be high on the agenda for SMEs and they need to seek out alternative opportunities outside Singapore,” Mr Teo said.
Q1Q2 2016 Index