Weak profit outlook taints Q2 business sentiment

Organisations are least optimistic with new orders and net profits.

Business optimism amongst local firms dipped 7.88 percentage points (ppt), both on a QoQ and YoY basis, for Q2 after profits and sales volumes went down in Q1, according to Singapore Commercial Credit Bureau’s (SCCB) Business Optimism Index report.

The report stated that all six indicators contracted in Q2, led by new orders as it reversed the 3.98 ppt rise in Q1 to a 12.44 ppts crash. Net profits also saw a 5.97 ppts slip and volume of sales dropped 9.95 ppts from a 6.97 ppts growth over the same period.

Likewise, selling price dived 8.46 ppts, whilst inventory levels dropped further in the contractionary zone from -0.50 ppts in Q1 to -5.47 ppts in Q2. Employment levels tumbled by 4.98 ppts.

On a YoY basis, all these six indicators have also deteriorated. The construction, services and manufacturing sectors are the least optimistic.

In the construction scene, both net profits and new orders widened from a 20 ppts fall in Q1 to a 30 ppts crash in Q2 2020. Meanwhile the services sector saw its sales volume and net profit reversed from +54.84 ppts to -51.61 ppts and -19.36 ppts over the same period, respectively.

Lastly, selling price and new orders in the manufacturing industry each contracted 10ppt in Q2. Similarly, its net profits dipped from -5.0 ppts in Q1 to -10.0 ppts.

In addition, optimism in the financial sector also fell as its volume of sales, new orders and inventory levels have moderated downwards from +50 ppts to zero ppts over the same period.