Small and medium enterprises are pessimistic about their prospects for the first half of 2017 and expect a reduction in both their turnover and profitability.
The latest SBF-DP SME Index, which measures the business sentiment of SMEs in coming two quarters, shows SMEs expect their businesses to be worse off in the first six months of 2017 than they are now.
The Index measures the business sentiment of SMEs for the next six months (Q1 and Q2 of 2017) and is a joint initiative of the Singapore Business Federation (SBF) and DP Information Group (DP Info). DP Info is part of the Experian Group.
More than 3,600 SMEs were surveyed between October and November 2016 on their outlook and sentiment.
The Overall Index score fell by 0.80 per cent to a score of 49.8. This is the first time in the seven-year history of the Index that it has fallen below 50.0, indicating a pessimistic outlook.
Five of six industries now have a negative outlook for the coming half year, with the Business Services Sector recording a neutral Index score of just 50.5.
The Index scores for Turnover and Profitability Expectations are both at record lows. SMEs engaged in Commerce/Trading, Construction/Engineering, Retail/F&B, Manufacturing and Transport Storage expect their turnover to decline in the next six months. The Business Services sector is slightly optimistic that their sales will be maintained.
For the second consecutive quarter, SMEs expect their profits to fall. The Profitability Expectations Index score fell from 4.76 to 4.71, indicating how reduced sales and high operational costs are compressing already lean profit margins and driving many SMEs into losses.
Construction/Engineering, Manufacturing, Retail/F&B and Transport/Storage SMEs are all expecting lower profits in the first half of 2017. Construction/Engineering SMEs indicated the steepest decline in profit expectations – a fall of 4.82 per cent.
A relatively flat reading of 5.01 suggests that Business Services SMEs are not expecting any change in performance compared to the previous quarter.