After experiencing a severe downturn in 2009, the world economy is expected to bounce back in 2010. While the uncertain financial system continues to cast shadow on the recovery, there are signs that the revival is taking place across the globe. The global economy is expected to recover gradually in the first quarter of 2010. The International Monetary Fund (IMF) had revised its economic growth forecast for US and Japan to 1.5% and 1.7%, respectively. However, India and China are expected to outpace the G8 and witness a stronger growth in 2010. India, having registered a better-than-expected 7.9% expansion in 2009, is confident that the country will enjoy a steady growth in the new year. The Beijing government also announced recently that China is targeting a 9% economic growth this year.

The Asia-Pacific Economic Cooperation (APAC) has also taken various practical measures to promote trade in the region. By enhancing customs clearance efficiency, improving coordination among border agencies, forging greater multi-modal transport linkages, and developing common technical standards, it will become faster, cheaper and easier to conduct businesses in the region.

In December 2009, the Ministry of Trade and Industry (MTI) reported that it is unlikely for Singapore to fall back to recession in 2010, thanks largely to the opening of the integrated resorts and two plants in the biomedical and chemical industry. However, the economic growth in the months ahead is expected to be uneven.

The recovery of the labour market is also expected to lag behind the recovery of the larger economy. This is a typical phenomenon and the unemployment rate is expected to stay up for some time, despite the fact that business and hiring sentiments are picking up strongly in recent months.

The general business sentiment is expected to improve in Q1 2010. A large proportion of the surveyed companies anticipate a rise in their sales volume and net profit. A moderate increase in selling price, employment and inventory level is also expected.

A large proportion of the services companies are optimistic that their sales volume, net profit, selling price and employment will grow in Q1 2010. However, they are cautious about the business situation when compared with Q4 2009.

Compared to the previous quarter, the manufacturers are also rather cautious in their sales volume, net profit, inventory level and employment. They are expecting their selling price to decline in Q1 2010.

Similarly, the construction sector also presents a fairly cautious outlook when compared with Q4 2009. Despite the boost in housing demand, the size of employment in the construction sector is expected to shrink. However, the sector’s net profit is anticipated to grow in Q1 2010.

The financial sector anticipates that their net profit and selling price will grow. In fact, more financial companies are optimistic about their net profit and selling price when compared with the previous quarter. However, this is not matched with an improved sentiment for their workforce, which is expected to remain status quo.

The details about the indictors are discussed in the following sections.


• Strong increase in volume of sales

Generally, the companies surveyed present an improved business outlook in sales volume in Q1 2010. With the number of optimists outnumbered the pessimists, the overall Optimistic Index for Volume of Sales remains in the positive region at 33%. For all the surveyed sectors taken together, 51% of the companies anticipate their sales volume to rise, while 18% expect it to decline. The remaining 31% companies are confident that their sales volume will remain unchanged. The overall sentiment is slightly less bullish when compared with Q4 2009 (net +44%).

The optimism is observed across all sectors, with agriculture (67%), finance (45%) and wholesale (43%) leading the growth. The manufacturing sector reported the lowest net increase in volume of sales in Q1 2010 (net +16%). This is somewhat lower than the previous quarter (+45%). This could be caused by the weakened consumer demand in the US market, which is experiencing high unemployment. The export market will grow at a sluggish pace in 2010.




• Strong Increase in net profit

As in the previous quarter, the surveyed companies present an optimistic outlook for their net profit in Q1 2010. This is consistent with the improved business and economic conditions in Singapore. In line with the expectations about the sales volume, approximately 47% of the companies anticipate a rise in their net profits in Q1 2010. On the other hand, 18% of the companies expect the opposite scenario. As a result, the overall Optimism for Net Profits remains in the positive region at 29%. This is slightly lower than Q4 2009 (net +38%).

The high level of optimism in net profit is driven by all industries, except for agriculture (net -33%). In fact, the agricultural sector had been cautious and pessimistic about their net profits in the last few quarters.

Leading the growth are the wholesale (+43%), financial (+36%) and construction (+33%) sectors. The local property market is picking up quickly as the demand for local properties continues to increase despite the uncertain long-term economic condition.




• Moderate increase in selling price

The selling price is expected to rise moderately in Q1 2010. While the majority (69%) of the surveyed companies anticipates an unchanged situation, 21% predict a rise in selling price. This is higher than the 10% of respondents who expect a decline in price level. As a result, the net Optimism for Selling Price stands at +11%. The situation is similar to Q4 2009 (+13%).

The improved sentiment is strongly reflected by the transportation (net +32%), and construction (net +25%) sectors. On the other hand, the manufacturing (net -16%) and the agricultural (net -33%) sectors expressed their pessimistic views about the trend of their selling prices.




• Increase in new orders in the manufacturing sector

Despite the uncertain external demand, about 26% of the manufacturers surveyed anticipate an improvement in their order book position in Q1 2010. On the other hand, 11% express their pessimistic stand and 63% hold the opinion that the situation will remain unchanged. Thus, the net Optimism for New Orders for the sector stands at about +16%. The manufacturing sector is the only sector which supplied information about their expectation on new orders.




• Modest increase in inventory level

The inventory level is expected to increase in Q1 2010. As in the previous quarter, the Optimism for Inventory Level for Q1 2010 remains in the positive region, albeit at a mere +6%. This contrasts significantly with the condition in Q4 2009 (net +41%).

The growth is only observed in the agricultural (net +100%), wholesale (+14%), transportation (+12%) and manufacturing (+5%) sectors.




• Modest rise in employment

The surveyed companies remain cautious in their employment outlook, and the sentiment for Q1 2010 is comparable to that of the previous quarters. While 74% of the respondents foresee a status quo in their workforce, 16% predict that they will hire more workers in Q1 2010. On the other hand, 11% of the companies surveyed are less optimistic in their outlook, thus indicating that they might downsize their workforce in Q1 2010. This resulted in the net Optimism for Employment to stay in the positive region (+5%) for the third quarter running.

Employer hiring expectations are strongest in the primary sectors: agriculture (net +33%) and mining (+20%). The manufacturers expect no change in their workforce.