SMEs' bullish on prospects for H2 despite global trade tensions

The business services sector is the most consistently optimistic whilst retail/F&B recorded improvements.

Small and medium enterprises (SMEs) in Singapore stayed upbeat regarding prospects for the next six months as they expect a period of slow but steady growth, a study revealed.

The Singapore Business Federation-DP Information Group (SBF-DP) SME Index recorded a relative stability with SMEs shifting marginally from 51.8 to 51.8 which indicates SMEs’ continued optimism.

“Notwithstanding regional and international geopolitical tensions, as well as the ongoing trade disputes between US and China, SMEs remain cautiously optimistic about their business outlook for the second half of this year,” SBF CEO Ho Meng Kit commented.

The outlook for SME turnover and profits both remained in the positive territory with minor movements from the previous quarter. The turnover expectations score for all SMEs stayed the same as last quarter’s 5.38, whilst the profitability expectations score became more positive from 5.28 to 5.29.

Also read: Business optimism hits 3-year highs in Q3

“The more consistent and predictable a company’s performance, the easier it is for managers to plan the resources and cash flow required to fund growth.” DP Information credit services and strategy for Southeast Asia general manager James Gothard said.

“Consistency breeds confidence in the mind of SME managers, where volatility makes them nervous and risk-averse,” he added.

Across the industries, the business services maintained being the most consistently optimistic with no records indicating pessimism and contraction as its overall scores are never below 50.0. 

“They have topped the rankings for optimism every quarter for the last four years,” Gothard commented.

With its diversified activities including management consultancy, training and professional consultancy, the need for business services remains steady amidst the seasonal or cyclical shifts in other sectors’ performance.

“Singapore companies not only provide services to local companies, but to the many regional and multinational corporations headquartered here,” Gothard explained.

The report also noted that 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.

As SMEs from retail/F&B sector were the most bullish in terms of business expansion and hiring expectations, they may be enjoying the fruits of their growth strategies in the present quarter with the approach of year-end festivities, the index predicted.

“Just 15 months ago they (retail/F&B sector) were predicting their businesses would shrink. Today their outlook is improving faster than any other sector,” Gothard noted.

The index measured business sentiment of SMEs for July to December 2018 based on a survey made during April and May 2018 amongst more than 3,600 SMEs.