Construction sector confidence drops as growth prospects dim

It's one of the most pessimistic sectors in Singapore.

Business confidence within the construction sector has taken a turn for the worse for the first quarter of 2016, after emerging as one of the least optimistic sectors in the fourth quarter of 2015.

According to the latest Business Optimism Index by the Singapore Commercial Credit Bureau, five of six business indicators were expected to be contractionary for Q1 2016 as compared to none in Q4 2015.

The weaker showing was largely attributed to muted public building activities. For instance, firms expect their earnings to decline in the coming quarter, with the net profits indicator dropping from +30.77 percentage points in Q4 2015 to -8.33 percentage points in Q1 2016.

Both inventory and employment levels dived into negative territory, from +46.15 percentage points in Q4 2015 to -8.33 percentage points in Q1 2016 and +61.54 percentage points in Q4 2015 to -16.67 percentage points in Q1 2016, respectively.

Meanwhile, both selling price and volume of sales dropped moderately from +7.69 percentage points in Q4 2015 to -8.33 percentage points in Q1 2016 and +15.39 percentage points in Q4 2015 to 0 percentage points in Q1 2016 respectively.

New orders within the construction sector are expected to be contractionary for Q1 2016 at -8.33 percentage points.

In a report early in November, BMI Research said that construction growth in Singapore will slow on back of the ongoing slowdown in the country’s property market.

“A slowdown in Singapore's property market, owing to factors such as increase in supply across various property segments, a weakening economy, rising interest rates and tightening of immigration policies has prompted us to downgrade our growth forecast for the construction sector. We now forecast real growth of 2.3% and 2.1% in 2015 and 2016 respectively,” BMI Research said.

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