Business optimism tumbles as firms face dwindling profits, slowing sales

Corporate confidence deteriorated across services and manufacturing.

Singapore-based companies have grown steadily more pessimistic about their growth prospects for the third quarter, according to Singapore Commercial Credit Bureau (SCCB)’s latest quarterly Business Optimism Index (BOI).

On a year-on-year basis, the BOI has dived significantly from +14.6 percentage points to just +1.11 percentage points.

The report showed that companies expect both volume of sales and net profits to contract in Q3. Selling prices are also forecasted to head south, while inventory levels and employment levels also slipped noticeably.

The construction sector emerged as the most optimistic sector due to the expected increase in public construction contracts being awarded in the upcoming months. The financial sector emerged as the second most optimistic sector, followed by the wholesale sector.

However, business sentiment within the services and manufacturing sectors remained downbeat. Retail activities within consumer-facing segments are expected to remain weak, while demand from regional clients are also expected to stay soft.

“The overall outlook for local businesses remains weak across most sectors. With the softening of retail activities in Singapore, we are expecting sentiments within the consumer-facing services sector to be dampened. At the same time, the influence of global downside risks on export-oriented sectors, such as the potential Brexit from the Eurozone as well as China’s emphasis on lower imports and higher domestic production, are likely to persist into 2H 2016,” saidAudrey Chia, SCCB’s Chief Executive Officer.