Business sentiment still negative in Q4: SCCB

But the financial, manufacturing, and services sectors’ outlooks improved slightly.

Business sentiment amongst local firms remains pessimistic in Q4 although improving when compared to the previous quarter, according to the Singapore Commercial Credit Bureau (SCCB).

The bureau’s latest Business Optimism Index results revealed that the BOI remained in the contraction zone at -4.97 percentage points (ppt), a drop from the growth of 4.82 ppt recorded in Q4 2019. However, it did inch up slightly from the -5.16 ppt in Q3.

“On the overall, business sentiments in Singapore are expected to remain downbeat for the final quarter of 2020. With heightened global geo-political tensions, a protracted re-opening of international borders and delayed resumption in activities locally for certain sectors such as construction, there are still no clear prospects of recovery in sight within the short-term,” noted Audrey Chia, SCCB’s CEO.

Only one of the BOI’s six indicators are out of the contractionary zone in Q4. New orders jumped to a growth of 8.89 ppt from -10 ppt in the previous quarter.

Some registered improvements although remained in doldrums. Volume of sales inched up slightly to -1.11 ppt from -3.33 ppt in Q3, whilst Net profits improved to -5.56 ppt in Q4 from -8.89 ppt in Q3.

The remaining three further deteriorated in Q4, led by selling price, which dived further to -17.78 ppt for the quarter from -10 in Q3. Employment levels dropped to -13.19 ppt in Q4 from -3.29 ppt in Q3. Finally, inventory levels fell to -8.7 from -3.29 in the previous quarter.

SCCB’s China observed that certain sectors showcased strength amidst the ongoing rough times. These are the professional and IT services, as well as the manufacturing and financial services sectors, which have all anticipated a slightly better outlook as compared to Q3.

As with the previous quarter, the financial sector’s sentiments continue to improve in Q4, with volume of sales, net profits, and inventory levels rising to positive territory.

The manufacturing sector is also moderately upbeat with volume of sales, net profit, and new orders indicating expansions for the quarter. However, volume of sales dropped from +29.41 ppt in Q3 to +11.76 ppt in Q4; whilst inventory levels dived to the contractionary zone, from +588 ppt in the previous quarter to -17.65 in Q4.

Employment in the manufacturing sector fell to -29.41 ppt in Q4 from its neutral score in Q3.

The services sector sees a slight improvement in Q4, with three of six indicators in the positive territory: volume of sales, net profits, and new orders. However, selling price remains in contractionary levels, whilst inventory levels and employment is expected to further deteriorate.

Sentiments in the construction and transportation sectors remain downbeat with 5 and 4 indicators in the negative zone, respectively.

“As COVID-19 has accelerated the digital transformation among local firms, businesses which have been able to pivot their business models were better able to shore up their operations quickly to keep their businesses going during these challenging times. Whilst the support measures from the government has helped firms deal with short-term business challenges, it is critical for firms to also address the strategic long-term needs to ensure that their business remains sustainable,” Chia noted.