The improvement was fuelled by broad-based growth across almost all industries, with manufacturing returning to expansion after five consecutive quarters of contraction. — The Straits Times
SINGAPORE: Singapore’s small and medium enterprises (SMEs) extended their growth momentum for a second consecutive quarter, according to the latest OCBC SME Index released on Oct 15.
The improvement was fuelled by broad-based growth across almost all industries, with manufacturing returning to expansion after five consecutive quarters of contraction.
The quarterly index, which tracks the business health and performance of SMEs, rose to 50.8 in the third quarter of 2024 from 50.2 in the second quarter.
A reading above 50 signals increased business activity compared with a year ago, while a score below 50 indicates a contraction.
The index is compiled from the transactional data of more than 100,000 OCBC SME customers in Singapore, each with annual revenues of up to S$30mil.
In the third quarter, SME collections increased by 0.4% year-on-year (y-o-y), while payments edged up by 0.3%, reflecting a modest rise in operating costs.
Out of the 11 industries tracked, nearly all – except for information and communications technology (ICT) – were in the expansionary range, up from seven in the previous quarter.
The manufacturing industry saw its index climb to 50.4 in the third quarter, up from 49.9 in the previous one, driven by a 9.8% y-o-y increase in collections.
However, this was tempered by a 6.8% rise in payments.
Overseas collections and payments also surged, rising by 25.5% and 40% respectively, compared with the same period in 2023.
“While the recovery in global electronics demand and improvement in business sentiments and factory output bode well for SMEs in the industry, it remains to be seen whether growth can be sustained in the near term,” OCBC Bank said.
Domestically oriented industries, such as food and beverage, healthcare, retail and education, continued to “see healthy business activity”, maintaining levels similar to those seen in the second quarter.
In the third quarter, both the business services and building and construction industries returned to expansionary territory, after previously contracting.
Business services saw its index rise to 50.6, supported by strong performances in the advertising and exhibition and accounting and legal segments.
Similarly, the building and construction industry posted an index of 50.4, rebounding after a dip in the previous quarter.
Although collections increased, this growth was partly offset by a rise in payments.
The ICT industry, however, continued to struggle, with the index slipping to 48.7 in the third quarter – marking its ninth consecutive quarter of contraction.
Although information technology consultancy and ICT manufacturing and sales recorded expansionary readings of 50.2 and 50.5, the industry remained under pressure due to weaknesses in the data processing and software development segment, which registered a reading of 48.1.
Despite these challenges, ICT business owners were relatively optimistic, with 53% expecting business conditions to improve over the next six months, while only 9% forecast further deterioration.
Looking ahead, the index is expected to remain slightly expansionary in the fourth quarter, supported by a recovery in global electronics demand and the prospect of further interest rate cuts.
“However, downside risks persist, as heightened geopolitical tensions would result in greater uncertainty in the macroeconomic environment,” OCBC cautioned.
Business confidence among SME owners remained similar to the previous quarter, with 48% of the 1,100 respondents expecting improved performance over the next six months.
Furthermore, another 40% foresee steady conditions, while 11% anticipate a downturn. — The Straits Times/ANN
