Business sentiment rebounds to 53.3 in Q2 as AI momentum strengthens, costs ease

Profitability expectations rose 5.1 points to 52.6.

Business sentiment in Singapore rebounded in the second quarter of 2026, supported by resilient domestic growth, stronger-than-expected global AI investment, and a less severe-than-feared impact from the Middle East conflict.

According to the Singapore Business Federation (SBF), its National Business Survey 2026 – Q2 2026 Business Sentiments Edition found that the Business Expectations of the Singapore Economy (BSI) rose 2.0 points to 53.3 in Q2 2026, reversing the decline recorded in the previous quarter.

Businesses also became more optimistic about Singapore’s economic outlook. The proportion expecting the economy to worsen over the next 12 months fell to 32% from 41% in Q1.

"The improvement was broad-based, with easing cost pressures and stronger profitability expectations and growth confidence. Sentiment around access to financing and government support continues to remain steady," the report said.

However, satisfaction with current business conditions remained subdued, indicating that businesses continue to face near-term challenges despite improved expectations.

Sentiment improved across most sectors, with banking & insurance, health & social services, and other financial & insurance Activities recording the strongest outlooks. Retail trade, education, and wholesale trade were comparatively more bearish.

Cost expectations also eased, falling 4.7 points to 71.2 from 75.9 in Q1. The decline was more pronounced amongst large companies, whose cost expectations fell 8.8 points to 68.4, compared with a 3.9-point decline to 71.6 amongst SMEs.

Real estate activities, health & social services and retail trade were amongst the sectors expecting the largest cost increases, whilst hotels, restaurants & accommodations, IT & related services, and banking & insurance reported comparatively lower cost concerns.

Growth confidence rose 1.5 points to 57.1, reversing the decline in Q1. Banking & Insurance, Other financial & insurance activities, and health & social services were the most optimistic sectors, whilst retail trade, hotels, restaurants & accommodations, and education remained comparatively subdued.

Profitability expectations increased 5.1 points to 52.6, with gains recorded among both SMEs and large companies. SMEs saw a 4.7-point increase, whilst large companies recorded a 6.9-point rise.

Operational capacity utilisation edged up 0.6 points to 57.4, pointing to a modest strengthening in business activity. Capacity pressures were more pronounced in retail trade, education, and hotels, restaurants & accommodations.

The hiring outlook also improved, rising 1.2 points to 56.3. SMEs drove the increase with a 1.4-point rise, while the outlook among large companies remained broadly stable.

Banking & insurance, health & social services, and administrative & support service activities recorded stronger hiring intentions. IT & related services, manufacturing, and logistics & transportation were comparatively more cautious.

Confidence in access to financing rose 1.0 point to 54.8, led by SMEs, which recorded a 1.5-point increase. Confidence amongst large companies edged down 0.4 points.

Real estate activities, banking & insurance, and other inancial & insurance activities recorded the strongest financing confidence, whilst IT & related services, administrative & support service activities, and education reported comparatively lower confidence.

Sentiment towards government support remained broadly stable, edging up 0.4 points to 56.3. health & social services, banking & insurance, and education recorded the most positive sentiment, whilst retail trade, administrative & support service activities, and IT & related services were comparatively more subdued.

SBF Chief Executive Officer Kok Ping Soon said the rebound in business sentiment reflected greater confidence in Singapore’s economic outlook and easing cost pressures.

“While external risks remain, businesses are demonstrating resilience, adapting to changing conditions, and positioning themselves for growth,” he said.

“Our focus must now be on helping companies strengthen their competitiveness, embrace innovation and capture new opportunities in a rapidly evolving global economy,” added KoK.