Business sentiments are optimistic for 3rd Quarter

Business sentiments among local firms have remained expansionary for the second consecutive quarter in Q3 2021, improving marginally from Q2 2021. According to Singapore Commercial Credit Bureau (SCCB) – a subsidiary under Credit Bureau Asia (CBA) Limited, a credit and risk information solutions provider in Southeast Asia, Business Optimism Index (BOI) inched up marginally from +3.94 percentage points in Q2 2021 to +4.07 percentage points in Q3 2021. On a year-on-year (y-o-y) basis, BOI rebounded from -5.16 percentage points in Q3 2020 to +4.07 percentage points in Q3 2021.

For Q3 2021, 5 of six indicators for business sentiments are expansionary as compared to 4 indicators in Q2 2021.

According to SCCB, 3 of six indicators have experienced improvements on a q-o-q basis as compared to all six indicators in Q2 2021.

• Both volume of sales and net profit moderated from +9.92 percentage points in Q2 2021 to +7.63 percentage points in Q3 2021.
• Selling price rose from +1.53 percentage points in Q2 2021 to +2.29 percentage points in Q3 2021.
• New orders remained unchanged at +9.92 percentage points in Q3 2021.
• Inventory levels inched upwards from – 7.64 percentage points in Q2 2021 to -6.11 percentage points in Q3 2021.
• Employment levels increased from 0 percentage point in Q2 2021 to +3.05 percentage points in Q3 2021. On a y-o-y basis, 5 of six indicators have improved in Q3 2021.
• Volume of sales jumped from -3.33 percentage points in Q3 2020 to +7.63 percentage points in Q3 2021.
• Net profits rebounded from -8.89 percentage points in Q3 2020 to +7.63 percentage points in Q3 2021.
• Selling price increased from -10.0 percentage points in Q3 2020 to +2.29 percentage points in Q3 2021.
• New orders increased from -4.44 percentage points in Q3 2020 to +9.92 percentage points in Q3 2021.
• Inventory levels fell from -3.26 percentage points in Q3 2020 to -6.11 percentage points in Q3 2021.
• Employment levels rose from -3.29 percentage points in Q3 2020 to +3.05 percentage points in Q3 2021.

Key Highlights for Q3 2021 Business Sentiments Sectoral Outlook

The business sentiments outlook for the financial, manufacturing and wholesale sectors remained upbeat while sentiments within the services sectors are mixed. The construction and transportation sectors expect the outlook to remain muted.

Financial

As with the previous quarter, the outlook for the business sentiments financial sector is most optimistic with all 6 indicators in positive territory.

• Both volume of sales and net profit remained expansionary at +36.36 percentage points in Q3 2021.
• Selling price climbed remained expansionary at +27.27 percentage points in Q3 2021.
• New orders climbed from +27.27 percentage points in Q2 2021 to +36.36 percentage points in Q3 2021.
• Inventory levels remained at +9.09 percentage points in Q3 2021.
• Employment levels rose from +36.36 percentage points in Q2 2021 to +45.45 percentage points in Q3 2021.

Manufacturing

The business sentiments outlook for the manufacturing sector has also remained optimistic with all 6 indicators in the positive territory.

• Both volume of sales and net profit rose from +7.14 percentage points in Q2 2021 to +10.71 percentage points in Q3 2021.
• Selling price jumped from 0 percentage points in Q2 2021 to +3.57 percentage points in Q3 2021.
• New orders climbed from +21.43 percentage points in Q2 2021 to +25.0 percentage points in Q3 2021.
• Inventory levels rose from +3.57 percentage points in Q2 2021 to +7.14 percentage points in Q3 2021.
• Employment levels increased from +17.86 percentage points in Q2 2021 to +25.0 percentage points in Q3 2021.

Wholesale

Sentiments within the wholesale sector remains upbeat with 4 of six indicators in positive territory.

• Both volume of sales and net profit moderated from +23.53 percentage points in Q2 2021 to +17.65 percentage points in Q3 2021.
• Selling remained at +5.88 percentage points in Q3 2021.
• New orders climbed from +5.88 percentage points in Q2 2021 to +11.76 percentage points in Q3 2021.
• Inventory levels moderated from -29.41 percentage points in Q2 2021 to -23.53 percentage points in Q3 2021.
• Employment levels rose from -11.77 percentage points in Q2 2021 to -5.88 percentage points in Q3 2021.

Services

The outlook for the services sector has deteriorated slightly with 2 of six indicators in positive territory, as compared to 3 indicators in Q2 2021.

• Both volume of sales and net profit moderated from +18.18 percentage points in Q2 2021 to +11.36 percentage points in Q3 2021.
• Selling price fell into the contractionary zone from 0 percentage point in Q2 2021 to -2.27
  percentage points in Q3 2021.
• New orders moderated from +6.82 percentage points in Q2 2021 to 0 percentage point in Q3 2021.
• Inventory levels fell from -9.09 percentage points in Q2 2021 to -11.36 percentage points in Q3 2021.
• Employment levels rose from -9.09 percentage points in Q2 2021 to -6.82 percentage points in Q3 2021.

Construction

Sentiments within the construction sector remained downbeat with 4 indicators in the contractionary zone.

• Both volume of sales and net profit deteriorated from -8.33 percentage points in Q2 2021 to -16.67 percentage points in Q3 2021.
• Selling price remained unchanged at +16.67 percentage points in Q3 2021.
• New orders rose from 0 percentage point in Q2 2021 to +8.33 percentage points in Q3 2021.
• Inventory levels increased from -33.33 percentage points in Q2 2021 to -16.67 percentage
  points in Q3 2021.
• Employment levels fell from -16.67 percentage points in Q2 2021 to -25.0 percentage points in Q3 2021.

Transportation

Sentiments within the transportation sector remained weak with 5 of six indicators in the negative territory.

• Volume of sales, net profit and selling price remained at -18.18 percentage points in Q3 2021.
• New orders fell from 0 percentage point in Q2 2021 to -9.09 percentage points in Q3 2021.
• Inventory levels moderated from +9.09 percentage points in Q2 2021 to 0 percentage point in Q3 2021.
• Employment levels remained contractionary at -9.09 percentage points in Q3 2021.

The Ministry of Trade and Industry (MTI) has maintained the GDP growth forecast for 2021 to be between +4.0 per cent to +6.0 per cent.

“We expect sentiments among local businesses to remain cautiously optimistic in Q3 following a rebound in the previous quarter. The recent spate of tightening measures and border controls aimed at containing the resurgence in COVID-19 cases domestically have resulted in the further dampening of the outlook for certain sectors such as construction and transportation. Certain segments within the consumer-facing services sector have also experienced a moderation in outlook.” said Ms. Audrey Chia, SCCB’s Chief Executive Officer.

“Given the lingering uncertainties in the pandemic both locally and globally, we foresee the outlook to remain mixed and uneven across different sectors. Moving into Q3, firms will have to brace themselves for more downside risks ahead.” added Ms. Chia.

Overview of Business Indicators
Volume of Sales

Volume of sales moderated to +7.63 percentage points (compared to +9.92 percentage points in Q2 2021). The financial sector (net +36.36 percentage points) is most upbeat, followed by wholesale (net +17.65 percentage points), services (net +11.36 percentage points) and manufacturing (net +10.71 percentage points). The agriculture sector (net 0 percentage point) expected volume of sales to remain unchanged. The remaining sectors are downbeat – construction (net -16.67 percentage points), transportation (net -18.18 percentage points) and mining (net -25.0 percentage points).

Net Profit
Net profit moderated to +7.63 percentage points (compared to +9.92 percentage points in Q2 2021). Both financial (net +36.36 percentage points) and wholesale (net +17.65 percentage points) are most optimistic, followed by services (net +11.36 percentage points) and manufacturing (net +10.71 percentage points). The agriculture sector (net 0 percentage point) expected volume of sales to remain unchanged. The remaining sectors are downbeat – construction (net -16.67 percentage points), transportation (net -18.18 percentage points) and mining (net -25.0 percentage points).

Selling Price
Selling price increased to +2.29 percentage points (compared to +1.53 percentage points in Q2 2021). The financial (net +27.27 percentage points) is the most optimistic sector, followed by construction (net +16.67 percentage points) and wholesale (net +5.88 percentage points). Both agriculture (net -25.0 percentage points), transportation (net -18.18 percentage points) and services (net-2.27 percentage points) are downbeat while the mining sector has anticipated selling price to remain unchanged (net 0 percentage point).

Inventory Levels
Inventory levels increased to -6.11 percentage points (compared to -7.64 percentage points in Q2 2021). Both financial (net +9.09 percentage points) and manufacturing (net +7.14 percentage points) sectors are upbeat. The construction (net -16.67 percentage points), wholesale (net -23.53 percentage points) and services (net -11.36 percentage points) are downbeat. Both agriculture and mining (net 0 percentage point) have expected inventory levels to remain unchanged.

Employment
Employment levels increased to +3.05 percentage points (compared to 0 percentage point in Q2 2021). The financial (net +45.45 percentage points) and manufacturing (net +25.0 percentage points) sectors are most upbeat. The agriculture and mining sectors (net 0 percentage point) expected employment to remain unchanged. The remaining sectors are downbeat – construction (net -25.0 percentage points), transportation (net -9.09 percentage points), services (net -6.82 percentage points) and wholesale (net -5.88 percentage points).

Mr Paul Ho, chief executive of iCompareLoan, said: “Even if business sentiments may be upbeat for the next quarter, there is still room for caution. A lot of small businesses are suffering and we have not recovered from the second wave of the Covid-19 pandemic as well.”