Singapore’s OCBC SME Index Slips to 51.3 as Two-Speed Economy Widens

OCBC’s SME Index eased to 51.3 in Singapore’s second quarter, down from 51.6 in the first, as business consultancy, advertising and education firms slid deeper into contraction. Manufacturing, retail and transport still pushed the headline reading above the 50-point line that separates growth from decline. Retail posted the strongest score of any sector tracked, at 52.8.

Underneath that topline number sits a quieter problem. Across all small and medium-sized enterprises (SMEs), payments climbed 19.4% year on year, just ahead of the 19.1% rise in collections, a gap the bank says reflects rising costs more than rising business. Its prescribed fix, spreading into new markets, lands awkwardly next to a separate survey showing Singapore’s SMEs are the least enthusiastic in the world about doing exactly that.

Manufacturing and Retail Keep the Score Above Water

The 51.3 reading extends a run that had already reached four consecutive quarters above the 50-point threshold by the first quarter, when the index climbed to 51.6 from 50.8 the quarter before. A second quarter still above 50 makes it five straight.

Manufacturing climbed to 52.1. Transport and logistics rose to 51.5, a third consecutive quarter of expansion, with collections up 15.4% and payments up 14.4% as trade activity picked up. Information and communications technology (ICT) held at 51.1, supported by IT consultancy and ICT manufacturing and sales.

Retail eased slightly from 53.4 but still led every sector at 52.8, with collections and payments both up more than 17% year on year on the back of consumer spending. Eric Ong, head of enterprise banking at OCBC’s Global Commercial Banking division, said export and trade-linked sectors kept outperforming firms that serve mainly the domestic market.

“With ongoing geopolitical tensions and volatility in the Middle East, SMEs are navigating a complex landscape marked by persistent near-term cost pressures,” Ong said.

Eight of the sectors OCBC tracks stayed on the expansion side of 50. Four did not, and the split runs almost entirely along the same line: firms tied to trade and consumer spending are still growing, firms selling services to other local businesses are shrinking.

The Widening Cost Gap

Look past the sector scores and the same mechanic shows up twice. In business services, collections rose 7.3% year on year, but payments rose faster, at 8.8%. OCBC said the gap suggested firms were struggling to pass higher expenses on to customers.

Healthcare shows the same pattern, sharper. Collections there also rose 7.3%, while payments jumped 12.4%, more than five points faster. Healthcare providers alone contracted to 49.4, even as the broader healthcare category held at 50.1. Distributors fared better, at 51.9, likely buffered by pricing power further up the supply chain.

The bank said the figures suggested cost pressures may be outpacing revenue growth for healthcare SMEs specifically. Energy costs are a large part of why. Singapore’s Ministry of Trade and Industry-linked commentary this year has tracked how fuel benchmarks spiked after the Middle East conflict flared, and the Monetary Authority of Singapore’s own review noted that very low sulphur fuel oil prices nearly doubled to $1,190 a tonne in early March before retreating by April. Freight and energy pass-through of that kind ripples into payments long before it shows up in what customers are willing to pay.

Across every SME OCBC tracks, payments rose 19.4% year on year against 19.1% for collections. The bank said part of that increase likely came from companies passing higher fuel, freight and other costs down the supply chain rather than from stronger business volumes alone.

Advertising’s Losing Streak Reaches a Fifth Quarter

Business consultancy sat at 49.9 and advertising and exhibition at 49.2, marking a fifth consecutive quarter of contraction for the advertising segment. Both segments outweighed a smaller expansion elsewhere in business services, dragging the overall category to 49.7.

Education told a similar story. The category fell to 49.6 from 50.6, and training centres recorded the weakest reading in the sector at 48.4, a sharp reversal after sitting at 50.9 as recently as the first quarter. Formal education and commercial schools held at 49.5, matching a contraction streak that had already run seven quarters by the time the first-quarter report was published. Early childhood education was the lone bright spot, rising to 51.8.

A separate poll by the Singapore Business Federation, an industry group representing local businesses, found profitability expectations sitting at the weakest of seven measured business dimensions, a broader signal that the margin squeeze visible in OCBC’s data is not confined to one bank’s customer base.

The softest corners of Singapore’s SME economy this quarter share one trait: they sell expertise and services to other local businesses rather than goods abroad.

• Training Centres – 48.4, the weakest reading of any segment tracked
• Advertising and Exhibition – 49.2, contracting for a fifth straight quarter
• Healthcare Providers – 49.4, dragging an otherwise flat healthcare category
• Formal Education and Commercial Schools – 49.5, extending a multi-year slump
• Business Consultancy – 49.9, just below the break-even line

Each of these segments sits just below the 50-point mark rather than deep in contraction, which is its own kind of warning. Small shifts in cost or demand could tip them either way next quarter.

What Is the OCBC SME Index and How Is It Built?

The OCBC SME Index is a quarterly gauge of small business health in Singapore, built from the real collections and payments data of more than 100,000 OCBC Bank SME customers with annual turnover of up to S$30 million. A reading of 50 signals no change from a year earlier; anything above means improvement, anything below means deterioration.

OCBC describes it as the only quantitative index in Singapore drawing on 5 million data points across industry value chains, which is what lets it break results down to granular segments like training centres or healthcare distributors rather than just broad industries.

Alongside the transactional index, OCBC runs a companion sentiment poll of SME owners, which surveyed roughly 800 business owners as recently as the first quarter. In the second quarter, 33% of respondents said business had improved from three months earlier, up two percentage points from the previous poll. About 42% reported no change, while 19% expected conditions to worsen over the next six months.

Singapore SMEs Are the World’s Most Reluctant to Go Global

Ong’s advice to SMEs squeezed by costs includes expanding into more markets. A separate report released weeks earlier by Kreston Global, an international accountancy network, found Singapore’s SME leaders are the least willing in the world to take that advice right now.

Singapore respondents scored their optimism about international expansion at an average of 7.2 out of 10, the lowest of the 11 markets Kreston surveyed and below the global average of 8.2. Geopolitical instability was cited as the most significant threat by 52% of Singapore respondents, the highest share among the countries surveyed and above the 45% global average.

• 7.2 out of 10 – Singapore’s optimism score for overseas expansion, the lowest of 11 markets surveyed
• 52% – share of Singapore respondents naming geopolitical instability as their top threat abroad
• 66% – share who still expect expansion conditions to improve within two to three years, versus 86% globally
• 40% – share who say it is currently difficult to expand overseas at all

Helmi Talib, managing partner at Kreston Helmi Talib Singapore, said the city-state’s heavy reliance on trade means global disruptions hit business confidence directly, pushing firms toward a more selective, cautious approach to growing overseas even as ambition remains intact.

Rival lender UOB has staked part of its own growth strategy on the opposite bet, a $2 trillion wager spanning 500 regional offices built on the idea that Southeast Asian integration only deepens from here. OCBC itself has leaned into similar territory before; the group posted a record first-half net profit of S$3.93 billion in 2024, built partly on regional commercial banking. The gap between what banks are betting on and what their own small business customers feel ready to do is wide.

Ong Sees the Index Drifting Toward Neutral

Ong said the index could weaken further in the coming quarters but was expected to stay above the 50-point mark. “We anticipate the OCBC SME Index may trend closer to neutral levels,” he said.

His suggested playbook for SMEs facing that squeeze comes down to three moves.

• Expanding into more markets to diversify revenue away from a saturated domestic base
• Reducing exposure to swings in energy and currency prices through hedging or supplier diversification
• Using digital and AI tools to lift productivity and offset rising labour and rental costs

That third point is already playing out in how SMEs pick software. For many, the practical decision is not whether to adopt new tools but which ones, often a choice between customer-management and resource-planning systems that promise to do more with the same headcount.

Ong’s own numbers suggest the index keeps drifting toward that neutral line, still above 50, just barely.