The OCBC small and medium enterprise (SME) Index has extended its gains for the second quarter in a row, a report by OCBC released on Oct 15 states.
The OCBC SME Index uses SME transactional data of over 100,000 OCBC SME customers in Singapore with annual sales turnover of up to $30 million. The index is centred on a score of 50, which indicates zero changes in the inputs from a year ago.
In 3Q2024, the OCBC SME Index registered a reading of 50.8, marking an improvement from the previous reading of 50.2. This comes alongside a 0.4% y-o-y increase in collections and 0.3% y-o-y increase in payments.
Amidst cooling inflation and a growing external demand outlook, the performance of SMEs have improved this quarter, the report notes.
The GDP growth Nowcast for 3Q2024 is slightly above 3.5%, above the 2Q2024 GDP growth of 2.9%. For comparison, the latest 3Q2024 median consensus forecast from the MAS survey of professional forecasters in Sep 2024 stands at 2.6%.
Linus Goh, head of global commercial banking of OCBC, notes that Singapore’s manufacturing sector “turned expansionary” after five consecutive quarters of contractions. This comes amid the pickup in factory activity and business sentiments in the industry. “We expect the OCBC SME Index to remain slightly expansionary in the next quarter and range-bound moving ahead,” says Goh.
See also: Analysts maintain positive outlook on manufacturing sector in 2024 despite slowdown in IP
However, Goh also sees several downside risks including geopolitical tensions leading to increased uncertainty in the macroeconomic environment.
Looking to the various sectors, the manufacturing sector turned expansionary for the first time after five consecutive quarters of contraction. The OCBC SME index for the industry increased to 50.4 this quarter, up from 49.9 in the previous quarter.
The food and beverage industry and transport and logistics both expanded to 51.2 in 3Q2024, while the healthcare sector grew to 50.9. Building and construction also registered a slight increase to 50.4 this quarter, up from 49.8 in the previous quarter.
Business services increased to 50.6 this quarter, led by steady performance in advertising and exhibition (51.3) and accounting and legal (51.2) segments.
Meanwhile, education eased to 50.5 but remained expansionary this quarter. The information and communication industry fell to 48.7, remaining in contraction for the ninth consecutive quarter.
40% of respondents polled saw an improved business performance this quarter
About four in 10 respondents - or 40% of the 1,100 SME business owners polled in the 3Q2024 OCBC SME business outlook survey - say they saw improved business performance this quarter, as compared to three months ago.
This is supported by the growth in the OCBC SME index reading, representing a higher proportion as compared to 35% registered in 2Q2024.
In the building and construction sector, 45% of SMEs also saw better business activity, achieving the highest across all industries.
Looking ahead, the business confidence of SME business owners remained similar to 2Q2024, with 48% of the respondents expecting their business to perform better in the next six months. Another 40% are expecting it to remain the same, while 11% of the respondents are expecting a weaker near-term outlook.
