Singapore's business optimism surged amidst Fed tapering woes

Local firms positive on sales, profits growth.

Despite potential downside risks and uncertainties over the tapering of quantitative easing in the US, the outlook for Singapore is on course to remain positive for the final quarter of the year.

According to Dun & Bradstreet (D&B) Singapore’s latest Business Optimism Index (BOI) study, all 6 leading business indicators are in the expansionary region for the fourth quarter, compared to five in the previous quarter.

The strong reading bodes well for businesses here as global economic recovery though gradual and fragile is still within sight in the coming months.

This quarter, local firms have remained most optimistic about the volume of sales and net profits as both  indicators surged to 50.8 percentage points and 44.1 percentage points respectively. This represents more than twice the increase compared to the previous quarter when net optimism levels for volume sales and net profits registered 18.3 percentage points each.

Inventory levels have also risen sharply to 29.2 percentage points, compared to a mere 2.5 percentage points in the third quarter.

Following the recent measures by the government to give priority to local residents in the recruitment process, local firms have anticipated an increase in hiring over the next three months with a net optimism level of 30 percentage points. Selling prices have also increased substantially to 16.7 percentage points after remaining unchanged in the third quarter.

Meanwhile, manufacturers have anticipated a marginally higher increase in new orders from 25 percentage points to 26.7 percentage points. While factory output increased in August, industrial production fell by 1.4 percent month-on-month, according to a report released by the Economic Development Board (EDB).

A year-on-year (y-o-y) analysis further revealed that business confidence has improved significantly over the past year with 5 of six business indicators in the expansionary region. With the exception of new orders, all business indicators have risen over the past year.

The most marked improvements were seen in the volume of sales and net profits as they increased by 40.8 percentage points and 34.8 percentage points respectively. Inventory levels, employment and selling prices have also increased slightly compared to a year ago by 21.3 percentage points, 19.1 percentage points and 15.1 percentage points respectively.

Meanwhile, new orders have contracted by 23.3 percentage points from the same quarter last year. “Corporate optimism has remained strong despite the troubling signs of a sputtering economy globally. The upswing in business outlook is perhaps an indication of an improved pace of growth.

However, we should be mindful that while pessimism is relatively low, a large proportion of firms are not expressing optimism.

Whether it is the volume of sales or hiring prospects, we are witnessing a status quo for many businesses here for the fourth quarter.” cautioned Ms. Audrey Chia, D&B Singapore’s Chief Executive Officer.