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Business confidence takes a dive

Sentiment indicators for next 6 months sliding amid signs of nascent slowdown: BT-UniSIM survey

(SINGAPORE) Business confidence here has taken a dive, according to the latest BT-UniSIM quarterly survey of business activity. Companies are much less optimistic about the next six months and there are signs that a slowdown in business activities has started.

The survey of 137 local and foreign companies found that all indicators for Q3 were down from the previous quarter.

In particular, the business prospects net balance – the difference between the percentage of companies that expect better times and those that expect worser – slumped 17 points to 39 per cent from the last quarter.

Similarly, the sales net balance fell 6 points to 35 per cent, while the profits net balance slid 2 points quarter-on-quarter to 25 per cent.

The orders and new business net balance sank 8 points to 32 per cent – its first decline since the fourth quarter of 2006.

Noting that the overall balances on all indicators were down, survey director Chow Kit Boey said: ‘This implies that the strong business performance in the past six quarters has weakened.’

The previous downturn, which started in the second quarter of 2006, lasted four quarters.

But Ms Chow said that a future downturn is not likely to be drawn out, adding that it could result in lower growth rates for two to four quarters.

The BT-UniSIM survey found that foreign companies generally reported improvements from the preceding quarter, unlike their local counterparts which registered lower balances.

Foreign companies had a sales net balance of 36 per cent, up from 28 per cent, and a profit net balance of 21 per cent, up from 15 per cent in the previous quarter.

The respective figures for local companies were 29 per cent, down from 41 per cent, and 22 per cent, down from 32 per cent, quarter-on-quarter.

In terms of orders and new businesses, foreign companies reported a 2-point rise to a net balance of 26 per cent, while local companies reported a 11-point drop to 33 per cent.

In terms of business prospects in the next six months however, local firms were less pessimistic than foreign companies, although the number of optimistic local firms declined from three months earlier.

A net balance of 42 per cent of local companies reported positive sentiments – down from 64 per cent in Q2 this year.

Even though the comparative figure for foreign firms is at a lower 35 per cent, this was still an improvement over the 31 per cent seen three months ago.

Smaller companies reported a decrease in all indicators compared with the preceding quarter’s survey, and their sales, profits and orders and new business net balances turned into negative territory.

Small companies reported a 29-point plunge in sales net balance to minus 10, indicating that more companies reported lower rather than higher turnover.

Larger companies reported a 4-point drop in sales net balance to 40 per cent.

Among smaller companies, the orders and new businesses net balance plunged 33 points to minus 12 per cent, and their profits net balance shed 25 points to minus 9 per cent.

The business prospects net balance for small companies lost 29 points to 8 per cent, while larger companies reported a 16-point drop to 42 per cent.

A comparison of overall and overseas sales, orders and business prospects indicated that business activities were stronger in other countries than in Singapore.

In particular, foreign firms were the only group with better sales and orders in Singapore than abroad.

‘The net balances have generally fallen for the second consecutive quarter, suggesting that the business environments in domestic and overseas markets have weakened, particularly for small firms,’ the report added.

In Q3, the financial and business services sector replaced the construction sector narrowly as the star performer, capturing marginally over half of the total top positions.

The construction sector followed closely occupying the remaining slots, suggesting that expansion in Q3 this year was less dispersed than in previous quarters when more than two sectors occupied the top positions.

For the seventh consecutive quarter, the construction sector has been voted as providing the best prospects by all types of firms.

Irrespective of size and ownership, the financial and business services sector was the best performer in profits.

And it was also the best performer in terms of sales, profits and orders/new business for small and foreign firms.

 

Source: Business Times 19 Nov 07

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