SMEs Expect Steady Growth for Remainder of 2018
- Business Services remain the most optimistic, Retail/F&B on the rise
The Index remained relatively stable from the previous quarter, shifting marginally from 51.8 to 51.5, which indicates that SMEs continue to be optimistic.
The Index measures the business sentiment of SMEs for the next six months (July to December) and is a joint initiative of the Singapore Business Federation (SBF) and DP Information Group (DP Info), part of the Experian Group of companies. The index is based on a survey of more than 3,600 SMEs during April and May 2018.
Figure 1: Outlook for 3Q18 – 4Q18F (July to December)
The outlook for SME turnover and profits both remained in positive territory with minor movements from the previous quarter. The Turnover Expectations Score for all SMEs was the same as last quarter at 5.38, while the Profitability Expectations Score stayed positive from 5.28 to 5.29.
Industry Outlook Analysis
The Business Services sector had the highest overall Index Score of 52.3. It also had the highest Turnover Expectations Score (5.55) and Profitability Expectations Score (5.51).
Business Services is the most consistently optimistic industry in Singapore, never once recording a score indicating pessimism and contraction (i.e., an Overall Score below 50.0).
The Business Services sector provides support to diversified industries and includes activities such as management consultancy, training and professional consultancy. While other sectors might experience seasonal or cyclical shifts in performance, the need for business services remains steady.
The largest improvement in outlook came from the Retail / Food and Beverage (F&B) sector, whose Overall Index Score rose from 51.3 to 52.0. Last quarter, Retail/F&B SMEs were the most bullish on their business expansion and hiring expectations, a combination that indicated an intention to expand their operations. This quarter they may be enjoying the rewards of their growth strategies, which have lifted their spirits and outlook with the approach of the year-end festivities.
Comments from SBF
Mr Ho Meng Kit, CEO of the Singapore Business Federation said: “I was expecting the Index to improve over the rest of the year as this was the seasonal trend in the past in view of the year end festivities. The Index remained largely flat. While SMEs remain optimistic about their business outlook for the second half of this year, some caution has crept in. Their sentiment was affected by the on-going trade disputes between US and China. With both countries ratcheting up measures to impose additional tariffs on imports and possible investment restrictions, this certainly could have the potential to upend the positive sentiment of our SMEs. We will need to monitor this development closely especially how this will affect our businesses.
“In spite of the looming uncertainties, I encourage our SMEs to think long-term, leverage the supportive Government economic policies and continue with their efforts to transform their companies to be more innovative and competitive. SBF will continue to work with other Trade Associations and Chambers and Government to promote the growth and vibrancy of our SMEs”, he added.
Comments from DP Info
Mr James Gothard, General Manager, Credit Services & Strategy, South East Asia, Experian said SMEs would welcome a steady period of growth.
“SMEs foresee stability, which is good news. After coming through one of the most tumultuous and unpredictable decades in memory, a period of steady progress would be welcome.”
“The more consistent and predictable a company’s performance, the easier it is for managers to plan the resources and cashflow required to fund growth. Consistency breeds confidence in the mind of SME managers, where volatility makes them nervous and risk-averse.”
“The one industry which has been enjoying consistency is Business Services. They have topped the rankings for optimism every quarter for the last four years. Singapore companies not only provide services to local companies, but to the many regional and multinational corporations headquartered here.”
“The Retail/F&B is sector is one to watch. Just 15 months ago they were predicting their businesses would shrink. Today their outlook is improving faster than any other sector.”
“During the last few quarters Retail/F&B SMEs have been hiring, making capital investments and gaining easier access to funding. As a stronger economy fuels consumer confidence, these F&B companies have become increasingly positive about their future,” Mr Gothard said
Q3 - Q4 2018 Index