BUSINESS conditions finally turned expansionary in the first quarter of the year, the latest Business Times-Singapore University of Social Sciences (BT-SUSS) Business Climate Survey has found.
Sales and new orders moved into expansion for the first time in more than six years, while profits were largely out of contraction mode.
And for the second straight quarter, firms were on the whole optimistic about the next six months.
Commenting on the findings, Maybank Kim Eng economist Chua Hak Bin said: "The survey suggests that business sentiment remains upbeat and has not been dampened by the US-China trade-war noises."
The survey was conducted between March 12 and April 18, with 152 firms responding. It was led by consultants Chow Kit Boey and Chan Cheong Chiam.
Regression analysis of the survey results predicts growth of 4.6 per cent to 5.4 per cent in the second quarter, though other economists are less optimistic.
In the first quarter, the sales net balance turned positive for the first time since Q2 2011, at 11 per cent.
This was up from -6 per cent in the previous quarter and -23 per cent in the first quarter of last year.
The net balance is the difference between the percentage of firms reporting an increase in the indicator and those reporting a decrease. A positive net balance suggests expansion and a negative net balance, contraction.
Similarly, the net balance for orders and new business was 12 per cent, up from -5 per cent a quarter before and -24 per cent a year ago. In both sales and new orders, local firms performed better than foreign firms, and large firms better than small ones.
Positive net balances of local and large firms more than made up for negative or neutral net balances for foreign and small firms.
All four categories of firms saw generally better performance in overseas activities - and were more optimistic about overseas prospects - than domestic activities.
The only exception was large firms' sales, which had a net balance of 14 per cent for overseas sales, versus 15 per cent for domestic sales.
UOB economist Francis Tan said the better overseas figures might be due to regional economies growing more quickly than Singapore in this cyclical growth period.
Agreeing, Dr Chua cited markets such as Vietnam and Malaysia in particular. "Restructuring and stricter foreign-worker policies might also be hurting some domestic sectors, including construction, retail and food and beverage," he added.
Vishnu Varathan, head of economics and strategy for Mizuho Bank in Singapore, said this supports the wider picture of growth being driven by external demand.
"Domestic strength has thus far been isolated in pockets of financial services and nascent pick-up in property activity," he added.
Profits have largely left a long-running contractionary phase that began in Q1 2011, with the consultants expecting "a likelihood of profit expansion in the next quarter".
The profits net balance was -1 per cent, a large improvement from -25 per cent in the previous quarter and -28 per cent a year ago.
Large firms saw a positive profits net balance of 4 per cent, up from -22 per cent the quarter before. The three other categories of firms - small firms, local firms and foreign firms - saw smaller contractions in profits.
Amid this broad-based improvement, firms' optimism about the next six months persisted for the second straight quarter.
In the last quarter of 2017, the business prospects net balance turned positive for the first time since Q2 2014, at 24 per cent.
For the first quarter of 2018, it remained positive at 21 per cent.
The slight dip was due largely to decreased optimism among foreign firms, which had a business prospects net balance of 11 per cent, down from 34 per cent in the previous quarter.
Large firms also emerged less optmistic - and large firms tend to be foreign firms, said the consultants. These firms' lowered optimism could be rooted in weaker first-quarter sales and new orders, they added.
Dr Chua suggested external reasons as well: "Large foreign firms may be more mindful of the escalating US-China trade tensions and worried about the eruption of a full-blown trade war."
The detailed data show slightly fewer firms expecting better prospects in the next six months, offsetting a comparable drop in firms expecting worse prospects. More firms saw no change in business prospects.
Across the sectors, financial and business services emerged as the star performer in sales, profits and business prospects. Manufacturing saw the best performance in new orders. Firms in all sectors except construction were optimistic about the next six months.
Of all markets, Singapore's economic performance was expected to have the greatest impact on company sales in 2018.
China and Malaysia tied for second in terms of influence on sales, followed by Indonesia. Compared to a year ago, the influence of Malaysia, the US and India on company sales has risen.
Given that three of the overall net balances were now positive and the profit net balance "could be considered as no longer contracting", the first quarter "represents the beginning of an expansionary phase in the growth cycle", said the consultants.
This suggests higher economic growth in the coming quarters, they added. Their regression analysis points to a growth rate of 4.6 to 5.4 per cent for the second quarter. This would beat the advance first-quarter growth figure of 4.3 per cent. Other economists considered this overly optimistic. Mr Varathan expects Q2 growth to be possibly below 4 per cent, with export growth and industrial activity already peaking.
"Meanwhile, we watch for more evidence that activity pick-up in the service sector will offset moderating boost from manufacturing," he said.
Said Dr Chua: "There are tentative signs that manufacturing growth has peaked and will drop to the lower single-digits in the second quarter." He expects GDP growth "will likely cool off and come in closer to the 3 per cent handle rather than the predicted 5 per cent range".