SMEs' profit and turnover expectations hit 3-year high in 2017

A study implied that firms are more confident of the economy as they focus on the domestic market.

The sentiments of small to medium enterprises (SME) continue to improve with strong sales and profit performance expected in the next two quarters of the year, the SBF-DP SME Index revealed. The index rose from 51.2 to 51.8 this quarter, indicating a growing optimism among SMEs.

Most notably, the index’s provided score for turnover expectations hit a three-year high at 5.38, the highest since the Q3 2015. The index noted that all six industries expect their turnover to rise during the next six months. Meanwhile, the score for profit expectations hit 5.28, the highest since Q2 2015.

“As many SMEs are focused on the domestic market, an expected increase in sales strongly suggests a growing confidence in the Singapore economy amongst the companies surveyed. The increased turnover is expected to translate into higher profits,” the index said.

According to the index, SMEs expect the next two quarters to deliver their strongest sales and profit results since 2015. Sentiment improved across all five of the six industries, with the index score for business services remaining unchanged.

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All six industries recorded scores above 50.0 indicating a positive view of the coming six months. Business services continues to be the most optimistic with an overall index score of 52.1. They are closely followed by the commerce/trading sector with a score of 52.0, and the transport/storage sector with a score of 51.9.

The index noted that the Business Services sector provides support to other industries and includes activities such as management consultancy, training, and supporting professional advisories. “The improved outlook among the other sectors contributes to the high Index Score of the Business Services sector,” it said.

Notably, the global trade-linked sectors commerce/trading and transport/storage had negative index scores (Commerce/Trading 49.6; Transport/Storage 49.2) and expected their operations to contract 15 months ago. “A stronger global economy together with improved trading conditions have seen a turnaround in the fortunes of both sectors,” the index said.

Singapore Business Federation (SBF) CEO Ho Meng Kit noted that the positive sentiments of the latest SME Index will be reinforced by a facilitative set of Budget 2018 measures announced in February to foster a more vibrant and innovative economy. “In a recent poll of our members, 48% of respondents indicated that the Budget was useful in helping their companies deepen capabilities and transform. Notwithstanding the optimism amongst our SMEs and a supportive domestic policy environment, we are mindful that recent trade disputes between US and China could affect our growth path. This is a risk which we will need to monitor carefully,” he added.

The index is based on a survey of more than 3,600 SMEs during January and February 2018. It measures the business sentiment of SMEs for the next six months (April to September) and is a joint initiative of the SBF and DP Information Group (DP Info), part of the Experian Group of companies.