Concerns over global political headwinds and softer regional demand in the external-oriented sector were reasons cited for causing Singapore's Business Optimism Index (BOI) score to tumble to the second-lowest in two years.
The Republic's BOI score dropped from +10.79 percentage points in the fourth quarter of 2014, to +1.11 percentage points in the latest first quarter findings. Year on year, the score dropped from first quarter 2014's +13.13 percentage points, the Singapore Commercial Credit Bureau (SCCB) revealed in its report on Monday (Jan 12).
"Local business optimism is off to a cautious start for 2015 amid mounting concerns of an intensification of global political headwinds and softer regional demand in the external-oriented sector," the report noted.
Of the six indicators used to measure the BOI score, three of them fell in the contractionary region - a "strong contrast" to the previous quarter, when only fell in that region. These include Volume of Sales, Net Profit and New Orders.
Hiring sentiments remained healthy, driven mainly by "strong hiring intentions among domestically-oriented local firms", SCCB stated. The others to remain in the expansionary region are Selling Price and Inventory.
Services and agriculture were ranked as the two most optimistic sectors, with at least four business indicators in the expansionary region, the report stated.
Ms Audrey Chia, SCCB's Chief Executive Officer, said: "In line with the slow pace of global economic recovery, local business outlook continues to remain modest following the previous quarter's decline in BOI. It is clear that global adverse developments have roiled business confidence as BOI slid further, hovering just above contractionary levels this quarter."
Going forward into 2015, Ms Chia said a "significantly higher proportion of firms maintaining their current level of investments for business expansion, both domestically and externally, is expected.
"The good sign is that local firms are not exactly cutting back on investments and are more likely to shift their investments towards keeping their business lean, nimble and productive. This may involve skills upgrading of employees or of machineries and capital equipment," she added.
The SCCB conducts its Business Expectations Surveys every quarter. Each quarter, 200 business owners and senior executives representing major industry sectors across Singapore are asked if they expect increases, decreases or no changes in their upcoming quarterly sales, profits, employment, new orders, inventories and selling prices.