Local business confidence sours in Q4

Only one of the six study indicators recorded an increase, although it remained in the negative zone.

Local business confidence fell to its lowest since Q1 2018, with the business optimism index (BOI) dropping to +4.82 percentage points (ppt) in the final quarter of the year from +6.91 ppt in the previous quarter, according to the study by the Singapore Commercial Credit Bureau (SCCB).

On a quarterly basis, five of the six indicators measured in the index recorded declines. Only the selling price improved--although it remained in the negative zone at -3.33 ppt in the fourth quarter from -7.32 ppt in Q3.

Similarly, only one of the six indicators improved on a yearly basis: employment levels, which skyrocketed to 14.44 ppt in Q4 from 4.39 ppt during the last quarter of 2018.

In contrast, the volumes of sales crashed to 4.88 ppt in Q4 from 16.59 ppt over the same period last year. Net profits also dipped to 4.44 ppt in Q4 from 8.78 ppt in Q4 2018, whilst new orders diminished to 4.44 ppt in the fourth quarter from 12.68 ppt in the previous year. Inventory levels were also down more than 11 points to 2.22 ppt in Q4 from 13.66 ppt in the fourth quarter of 2018.

Furthermore, selling price remained in the contractionary zone, down from -0.98 ppt in Q4 2018 to -3.33 ppt in Q4 2019.

The financial sector emerged as the most optimistic sector with five indicators in the positive region, SCCB noted. All six indicators rose in the final quarter compared to Q3. In particular, the volume of sales, inventory levels, and employment levels skyrocketed to 66.67 ppt, 33.33 ppt, and 50 ppt in Q4, respectively.

Also read: Local technology and banking hiring to persist in 2019

Meanwhile, the transportation sector is also relatively optimistic according to the SCCB, with five of six indicators moderating upwards. Only the inventory levels remained unchanged at 0 in the fourth quarter of the year.

The construction sector saw “sustained improvement(s)” with three indicators in the expansionary zone. However, new orders and inventory levels remained in the contractionary zone; although new orders climbed to -20 ppt in Q4 from -40 ppt in the previous quarter, inventory levels inched to -30.0 ppt in Q4 from -40 ppt in Q3.

Both the manufacturing and wholesale trade sectors were amongst the least optimistic sectors. The manufacturing sector was dragged down due to the slowdown in electronics, transport engineering, and precision engineering sub-segments; whereas the wholesale sector remained downbeat due to a fall in non-oil domestic exports.

Also read: PMI edges up 0.1 to 49.9 in August

“Most sectors are experiencing a downturn for the final quarter of 2019, most noticeably the
manufacturing and wholesale trade sectors. This is largely due to trade tensions affecting
international supply chains, shrinking imports from China and a generally muted global outlook. This has led to negative spillover effects on the vulnerable trade-related sectors,” said Audrey Chia, CEO for SCCB.

Despite this, Chia noted that certain sectors show promise. “Despite the moderated outlook, we are still seeing signs of green shoots in certain sectors such as in the construction, transportation and services sectors. Growth in these sectors are expected to be sustained into the remaining months of the year,” she added.