Singapore’s business optimism weakens for the first time in two quarters

Check out which sector sees the glass half-empty.

According to Dun & Bradstreet, following the government’s official forecast for the economy to grow between 1 to 3 percent in 2013, local business optimism weakens for the first time after an upward trend for the previous two consecutive quarters. 

The latest quarterly Business Optimism Index (BOI) survey findings, just released today by Dun & Bradstreet (D&B) revealed that 3 out of 6 leading business indicators have fallen into the contraction region for the first quarter of 2013. This comes after a positive showing in Q4 2012 when all 6 business parameters are in the expansion region.

Here’s more:

Business confidence in Singapore began showing early signs of weakening in Q4 2012 when optimism levels have plateaued. Given that the global economy will remain sluggish, Singapore is expected to face more uncertainties in the coming months. The labour market will also be expected to remain tight in 2013.

This quarter, business optimism on volume of sales, net profits and inventory levels have all experienced sharp declines. Optimism levels for net profits are expected to decrease from 9.3 percentage points to -1.6 percentage points. Inventory levels have also fallen from 7.9 percentage points to -4.9 percentage points.

Meanwhile, volume of sales took a plunge from 10 percentage points to -5.1 percentage points quarter-on-quarter. With unemployment rates likely to remain at a dismal 2 per cent in 2013, hiring expectations for Q1 decelerated from 10.9 percentage points to 5.8 percentage points. Selling price is projected to increase at 1.6 percentage points while new orders are likely to remain unchanged for Q1 at 0 percentage points. 

Business pessimism is most evident in the manufacturing sector as net optimism levels for net profits and volume of sales dived to -50 percentage points on both indicators. The poor showing for manufacturers is also being reflected in a decrease in inventory levels and selling price at -62.5 percentage points and -25 percentage points respectively.

According to the Ministry of Trade and Industry’s (MTI) recent report, the deepening decline of electronic, ship parts and machinery exports in Singapore will continue to persist into the year, thus affecting business confidence within the sector. 

“The lackluster performance of the manufacturing sector and the overall economy as a whole has certainly dampened business sentiments here. With rising business costs from several sides including foreign worker levies and office rents, firms will have to cope with the difficulties which lie ahead.

Thus we can expect the recovery to be slow and the downward trend to continue moving into the first quarter.” warned Ms. Audrey Chia, D&B Singapore’s Chief Executive Officer.