Slowdown bites chunk off business sales and profits

Slowdown bites chunk off business sales and profits

 

BT-UniSIM survey finds companies more gloomy about next 6 months

 

By OH BOON PING

 

(SINGAPORE) Business sales and profits here have taken a hit in the first quarter of this year and economic growth looks set to slow in the months ahead, according to the latest BT-UniSIM quarterly survey of business activity.

 

Not surprisingly, a number of companies are now far less optimistic about the next six months, and the report forecasts Q1 GDP growth to be 6.4 per cent this year.

 

The survey of 120 local and foreign companies found that all indicators for Q1 were down from the year-ago period and three months ago.

 

In particular, the business prospects net balance – the difference between the percentage of companies that expect better times and those that expect worse – plunged 37 points to negative 17 per cent from Q4 last year. This was also lower than the 58 per cent seen a year ago.

 

Similarly, the profits net balance dived 37 points quarter-on-quarter (QoQ) to minus 12 per cent, while the sales net balance fell 27 points to 8 per cent from three months earlier.

 

The orders and new business net balance sank 40 points to minus one per cent both quarter-on-quarter and year-on-year.

 

As the sales net balance has been shown to be highly correlated with Singapore’s GDP growth, the report forecast an economic growth of 6.4 per cent last quarter based on the latest numbers.

 

In an email interview, survey director Chow Kit Boey noted that the overall balances on all indicators were down, and said slower growth in Q2 is expected, ‘even though US leading indicators rose for the second month in April and there is some view that the slowdown in the US economy will taper off by end of the year’.

 

‘Singapore will probably register another slow growth rate in Q3 given the strong base a year ago, but will pick up in Q4 because of US recovery and a low base in 4Q07. F1 will help to boost the economy in Q3 but not sufficiently to produce a high growth rate as a year ago.’

 

The BT-UniSIM survey found that local companies generally fared much better than their foreign counterparts, in that the key indicators fell less for them.

 

Sales net balance of local companies dropped 12 points to 15 per cent, while profit net balance slipped 14 points to negative 2 per cent.

 

The respective figures for foreign companies were minus 3 per cent, down from 48 per cent, and minus 23 per cent – down from 51 per cent a quarter ago.

 

In terms of orders and new businesses, foreign companies reported a 67-point plunge to a net balance of minus 16 per cent, while local companies reported a 28-point drop to 4 per cent.

 

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

 

A net balance of minus 3 per cent of local companies reported positive sentiments – down from 19 per cent in Q4 last year.

 

The comparative figure for foreign firms is at negative 32 per cent, and this was worse than the 36 per cent seen three months ago.

 

Small firms bucked the trend with higher sales net balance of 24 per cent – up from negative one a quarter ago, even though profit net balance shed one point to negative 5 per cent.

 

In contrast, sales net balance among large firms plunged by a sequential 32 points to 7 per cent, while profit net balance lost 41 points to negative 13 per cent.

 

Among smaller companies, the orders and new businesses net balance surged by a sequential 16 points to 15 per cent, while the equivalent for large firms fell 46 points to negative 2 per cent.

 

In terms of business prospects, the net balance for small companies lost 8 points to 18 per cent, while larger companies reported a 41 point drop to negative 21 per cent.

 

A comparison of overall and overseas business prospects, and orders indicated that the business climate here was better than those overseas.

 

For example, overseas business prospects balance was a negative 21 per cent – lower than minus 17 per cent for overall figure.

 

Similarly, the orders/ new businesses from overseas posted a net balance of minus 4 per cent – lower than minus one per cent overall figure.

 

In Q1, the construction sector displaced the financial and business services sector as the star performer. It has retained its top position in having the best business prospects for the 9th straight quarter.

 

Source: Business Times