Business Times - 19 May 2008
PROPERTY
Pre-sold projects lend support as developers undergo correction
Greater blow from weaker sales will be felt only over next few years: analysts
By LYNETTE KHOO
PROPERTY developers were mostly hit by slower residential sales in their first quarter results, and for some, they also suffered a lack of fair value gains in investment properties. But even as the residential segment undergoes a correction this year, analysts do not foresee significant earnings weakness as revenue from pre-sold projects is still lending support.
For developers with a large amount of pre-sold projects and are able to hold back new units to await better prices, the greater blow from the weaker home sales will only kick in over the next few years if market sentiment does not pick up, analysts say.
'The earnings for this year have been locked in by the sales done in the past two to three years,' said UOB KayHian analyst Vikrant Pandey. 'Sales have slowed down this year, but the impact will only be felt two, three years down the line when the actual construction takes place.'
Investors have been greeted with a mixed bag of earnings results from property developers for the first quarter. The impact of the US housing problems and global economic slowdown was felt in terms of lower transaction volumes as developers held back new launches in a quiet market.
There was also the timing issue in recognising earnings from development projects on a percentage of completion basis, which added to the earnings volatility, analysts say.
'Q1 is typically a slower quarter for developers simply because of the holiday season and development is slower,' said CIMB-GK analyst Donald Chua. The recognition of earnings from developments that are at the initial stages of construction is hence slower.
Keppel Land reported a 3.5 per cent dip in net profit to $60.3 million due mainly to lower contribution from property trading with the completion of several projects in Singapore and overseas and a writeback on provision in its property investment segment.
In the absence of fair value gains, CapitaLand's first-quarter net profit fell 59.3 per cent year on year to $247.47 million; Overseas Union Enterprise's (OUE) net profit slipped 69.2 per cent to $23.67 million and United Engineers' (UE) net profit slumped 90 per cent to $1.2 million. Excluding fair value adjustments, CapitaLand's net profit would have jumped 36.5 per cent year on year, while OUE and UE would have marked smaller net profit declines.
City Developments, however, which adopts the policy of stating net profit at cost less accumulated depreciation and impairment losses, posted a net profit growth of 30.8 per cent to $164.97 million in its fiscal first quarter despite its revenue falling 1.3 per cent from a year ago to $758.75 million.
Analysts noted that the practice of booking in revaluation differences in investment properties under the Financial Reporting Standard 40 is adding to the earnings volatility. This accounting method is seen inflating developers' bottomlines last year and cutting into their bottomlines in a poorer market condition like now.
But analysts added that they do not treat revaluation gains as part of core earnings and strip off revaluation gains from headline numbers before analysis. While there has been suggestions that FRS40 may not be an accurate reflection of earnings, it does provide a clearer picture of the actual values of properties owned by developers.
For the rest of this year, analysts do not expect developers to report fair value losses as there is room for rental upside, particularly in the office segment where new supply is not coming through yet. 'Rentals are coming from a very low base. There's still a lot of catching up to do,' Mr Pandey said, pointing to the heady asking prices for some prime grade office that have shot up to $17 per square foot.
But developers that lack strong cashflow from pre-sold projects will likely find the going tougher in an environment of low or zero revaluation surplus and slower home sales, analysts caution. Without holding power to defer launches, they will have to slash prices for new projects and accept lower margins.
For this year, Mr Pandey is factoring in a 20 per cent correction in the high-end segment, 13 per cent for the mid-end segment and 5 per cent for the mass market segment.
Copyright © 2007 Singapore Press Holdings Ltd. All rights reserved.
Tuesday, May 20, 2008
Profiteering adds to construction woes
Business Times - 19 May 2008
Profiteering adds to construction woes
As costs of materials rise, some suppliers default on earlier contracts to make more
By ARTHUR SIM
(SINGAPORE) The last thing the construction industry needs now is another roadblock. But with the cost of materials and shortages soaring, the opportunity to inflate prices is too much for some errant suppliers and sub-contractors to resist.
Sources told BT that some suppliers of building materials have been opting to default on earlier contracts because the current demand and prices are so strong, they can easily secure more profitable contracts elsewhere, stock piling materials in the meantime.
To add to the strain, labour supply has become so tight that crane operators, for instance, are said to be commanding salaries upwards of $8,000 per month.
A check with the Building and Construction Authority (BCA) reveals, however, that this opportunistic behaviour is not widespread - yet.
A BCA spokesman also said it has not received feedback of contract defaults by suppliers of steel and other construction materials, or of any delay in construction works due to such default of contractual obligations.
However, BCA said: 'We do understand that the suppliers have increased their importation and stocking up of steel rebars in view of the surging prices. Suppliers have also shortened the period of supply contract for rebars from the previous 12 months to the current six months.'
'Contractors and developers have to resolve the price issue based on their business practices, relationship and understanding. For projects which adopt price fluctuation for these materials, the cost impact on the contractors will be minimal,' added BCA.
Construction companies that BT spoke with had mixed reactions to the situation.
A spokesman for United Engineers Ltd said: 'The industry is particularly seeing some delays in projects, either in the midst of or commencing construction, that were awarded before the construction boom as prices negotiated at that time were definitely lower compared to now.'
Straits Construction director Wong Chee Herng said the industry has seen some smaller suppliers defaulting on contracts and causing delays but the level is still 'manageable'.
He added: 'Prices have moved up and there is no point lamenting . . . It's a choice of either negotiating or just walking away.'
With so much uncertainty, Straits Construction is more selective about tendering for jobs. 'If we feel we can't deliver, we won't tender,' Mr Wong said.
Other construction companies like Hiap Hoe and Sim Lian say they are not facing any delays.
Giving an insight into how suppliers are also facing the same challenges, Lee Metal Group executive director Lee Heng Thiam revealed how a steel supplier for Marina Bay Sands was contracted to supply 85,000 tonnes over a two- year period at US$600 per tonne. However, the price of this steel has since risen to US$1,000. 'It is too much for anyone to bear,' he said. And while the particular supplier was able to renegotiate the contract, Mr Lee said: 'I think they will still make a loss.'
To mitigate the risks, Lee Metal has to hedge its position. 'In the past, the practice was to sell first and buy later; now, it's the other way around,' he explained. This means it keeps a stockpile of 6-8 months worth of supply to ensure it can fulfil its obligations.
Price fluctuation clauses are not a big help to suppliers who stockpile. 'If prices are on a downward trend, we are in trouble,' he explained. 'Buying and selling needs to be managed tightly.'
HG Metal manages its stock on a tighter basis by maintaining 3-4 months worth of inventory amounting to as much as $200 million worth in stock at any one time. HG Metal CEO Wee Piew also said that it does not 'lock in' its prices. 'Most major suppliers don't set contracts,' he added.
'The only issue is when a big contractor wants to lock in prices. Then they have to deal with steel mills directly,' he added.
These mills are usually in China but both HG Metal and Lee Metal say their supply comes from international traders instead because of the uncertain supply from Chinese mills.
PSL Holdings, a foundation engineering specialist contractor, says that its operators of construction cranes and other vehicles are commanding 'very high salaries' but it has managed to factor increasing manpower costs into its contracts. 'The effect on our margins is minimal,' added a PSL spokesman.
PSL says it has not encountered delays so far but apart from rising salaries, it is faced with rising costs due to surging diesel prices as well as shortage of personnel. PSL said: 'We have managed to mitigate the higher costs because of the short duration of our projects.'
Developers that BT spoke too also say they are not facing delays.
City Developments Ltd (CDL) says it has not encountered any significant delays from its contractors. 'Perhaps they have made early confirmation orders on the construction materials and are not really affected by the present rising costs of materials,' added CDL's spokesman.
Frasers Centrepoint COO Cheang Kok Kheong did say that to counter rising costs, it has had to take certain steps including continuously reviewing its plans and specifications to ensure that cost-effective construction methods and alternatives are considered. 'In addition, we have improved and streamlined our procurement methods to get bulk pricing for construction supplies from our associates,' he added.
The construction industry is perhaps beginning to show signs of strain, and may need more help.
To this end, BCA says it is also working with the Real Estate Developers' Association of Singapore to encourage their member developers to make prompt payment to help ease the cashflow of the contractors.
Copyright © 2007 Singapore Press Holdings Ltd. All rights reserved.
Profiteering adds to construction woes
As costs of materials rise, some suppliers default on earlier contracts to make more
By ARTHUR SIM
(SINGAPORE) The last thing the construction industry needs now is another roadblock. But with the cost of materials and shortages soaring, the opportunity to inflate prices is too much for some errant suppliers and sub-contractors to resist.
Sources told BT that some suppliers of building materials have been opting to default on earlier contracts because the current demand and prices are so strong, they can easily secure more profitable contracts elsewhere, stock piling materials in the meantime.
To add to the strain, labour supply has become so tight that crane operators, for instance, are said to be commanding salaries upwards of $8,000 per month.
A check with the Building and Construction Authority (BCA) reveals, however, that this opportunistic behaviour is not widespread - yet.
A BCA spokesman also said it has not received feedback of contract defaults by suppliers of steel and other construction materials, or of any delay in construction works due to such default of contractual obligations.
However, BCA said: 'We do understand that the suppliers have increased their importation and stocking up of steel rebars in view of the surging prices. Suppliers have also shortened the period of supply contract for rebars from the previous 12 months to the current six months.'
'Contractors and developers have to resolve the price issue based on their business practices, relationship and understanding. For projects which adopt price fluctuation for these materials, the cost impact on the contractors will be minimal,' added BCA.
Construction companies that BT spoke with had mixed reactions to the situation.
A spokesman for United Engineers Ltd said: 'The industry is particularly seeing some delays in projects, either in the midst of or commencing construction, that were awarded before the construction boom as prices negotiated at that time were definitely lower compared to now.'
Straits Construction director Wong Chee Herng said the industry has seen some smaller suppliers defaulting on contracts and causing delays but the level is still 'manageable'.
He added: 'Prices have moved up and there is no point lamenting . . . It's a choice of either negotiating or just walking away.'
With so much uncertainty, Straits Construction is more selective about tendering for jobs. 'If we feel we can't deliver, we won't tender,' Mr Wong said.
Other construction companies like Hiap Hoe and Sim Lian say they are not facing any delays.
Giving an insight into how suppliers are also facing the same challenges, Lee Metal Group executive director Lee Heng Thiam revealed how a steel supplier for Marina Bay Sands was contracted to supply 85,000 tonnes over a two- year period at US$600 per tonne. However, the price of this steel has since risen to US$1,000. 'It is too much for anyone to bear,' he said. And while the particular supplier was able to renegotiate the contract, Mr Lee said: 'I think they will still make a loss.'
To mitigate the risks, Lee Metal has to hedge its position. 'In the past, the practice was to sell first and buy later; now, it's the other way around,' he explained. This means it keeps a stockpile of 6-8 months worth of supply to ensure it can fulfil its obligations.
Price fluctuation clauses are not a big help to suppliers who stockpile. 'If prices are on a downward trend, we are in trouble,' he explained. 'Buying and selling needs to be managed tightly.'
HG Metal manages its stock on a tighter basis by maintaining 3-4 months worth of inventory amounting to as much as $200 million worth in stock at any one time. HG Metal CEO Wee Piew also said that it does not 'lock in' its prices. 'Most major suppliers don't set contracts,' he added.
'The only issue is when a big contractor wants to lock in prices. Then they have to deal with steel mills directly,' he added.
These mills are usually in China but both HG Metal and Lee Metal say their supply comes from international traders instead because of the uncertain supply from Chinese mills.
PSL Holdings, a foundation engineering specialist contractor, says that its operators of construction cranes and other vehicles are commanding 'very high salaries' but it has managed to factor increasing manpower costs into its contracts. 'The effect on our margins is minimal,' added a PSL spokesman.
PSL says it has not encountered delays so far but apart from rising salaries, it is faced with rising costs due to surging diesel prices as well as shortage of personnel. PSL said: 'We have managed to mitigate the higher costs because of the short duration of our projects.'
Developers that BT spoke too also say they are not facing delays.
City Developments Ltd (CDL) says it has not encountered any significant delays from its contractors. 'Perhaps they have made early confirmation orders on the construction materials and are not really affected by the present rising costs of materials,' added CDL's spokesman.
Frasers Centrepoint COO Cheang Kok Kheong did say that to counter rising costs, it has had to take certain steps including continuously reviewing its plans and specifications to ensure that cost-effective construction methods and alternatives are considered. 'In addition, we have improved and streamlined our procurement methods to get bulk pricing for construction supplies from our associates,' he added.
The construction industry is perhaps beginning to show signs of strain, and may need more help.
To this end, BCA says it is also working with the Real Estate Developers' Association of Singapore to encourage their member developers to make prompt payment to help ease the cashflow of the contractors.
Copyright © 2007 Singapore Press Holdings Ltd. All rights reserved.
Retailers expect more belt tightening at this year's GSS
Business Times - 19 May 2008
Retailers expect more belt tightening at this year's GSS
By SARA LIM
(SINGAPORE) As Singaporeans tighten their belts amid higher inflation and concerns about a slowing economy, mass and mid-market brands are expecting to do better than their luxury counterparts in this year's Great Singapore Sale.
'With a less vibrant economic outlook, consumers are more inclined to spend cautiously at mass and mid-priced boutiques with more savings, rather than on luxury items,' said a spokesman for Wing Tai, which distributes popular fashion brands such as Topshop and Fox.
While the distributor was unable to provide any figures, it is 'conservatively optimistic' that overall sales this year will be higher than last year's. It expects new stores added to its mass and mid-market chains - G2000, Topshop, Dorothy Perkins, Ms Selfridge and Warehouse - to perform well.
On the overall retail scene, however, expectations for this year's sale are less rosy compared with 2006 and 2007, when strong consumer confidence and economic growth kept cash registers ringing. Takings during the sale period in June and July last year totalled $5.5 billion, up from $4.9 billion for the same period in 2006.
'While takings from the GSS might not necessarily fall, I would expect growth to slow compared with the same period last year, when we saw retail sales jump more than 15.4 per cent in June,' said Citigroup economist Kit Wei Zheng.
Mr Kit cited the 'artificial' surge in purchases of big-ticket items ahead of the two-point GST hike and lower consumer confidence in July last year as reasons for his less sunny outlook.
He also warned: 'Rising costs of living could continue to erode the purchasing power of households, and may be a drag on retail sales volumes.'
Retailers are hoping that deep discounts and other promotions available during the sale will entice more cost-conscious shoppers to hunt for bargains.
'Certainly, people are understandably more cautious about their spending, but this is exactly why they should take advantage of the Great Singapore Sale for the great buys and great value, and benefit from the savings that they can achieve,' said Lau Chuen Wei, executive director of the Singapore Retail Association.
Andre Lobo, senior advertising and promotions manager of mall operator Frasers Centrepoint Malls, agreed. 'Shoppers will respond to real bargains and attractive offers which will translate into overall savings, especially with the rise in the cost of living,' said Mr Lobo.
Frasers Centrepoint will offer a 7 per cent rebate in the form of shopping vouchers at its seven malls, including its flagship, The Centrepoint, at Orchard Road.
Mall operators in particular are pulling out all stops to draw the crowds.
Instead of relying on the usual lucky draw prizes to attract shoppers, CapitaLand Retail, is bringing six giant robots developed by the creators of science fiction film E T to its IMM, Junction 8 and Plaza Singapura malls.
CapitaLand hopes that the robots, which will appear in Asia for the first time, will 'provide education through entertainment'.
Shoppers at Frasers Centrepoint malls will be treated to stand-up comedy acts by Hossan Leong and Pamela Oei of the Dim Sum Dollies and have a chance to participate in talent shows hosted by MediaCorp artistes Kym Ng, Chen Li Ping and Pornsak.
As tourists dollars accounted for 40 per cent of retail sales in last year's GSS, retailers also hope that tourists will continue to bolster demand.
With a total of 10.3 million tourist arrivals in Singapore last year, the Singapore Tourism Board (STB) expects the GSS to attract even more visitors. It has been focusing its marketing efforts on the Asia-Pacific and Middle Eastern markets in particular.
'Even as the Singapore dollar strengthens against the US dollar, we hope visitors will continue spending at the GSS with the many promotions and exclusive tourist privileges available,' said Andrew Phua, the STB's director of cluster development, tourism shopping and dining.
Visitors will be treated to exclusive privileges, including a range of 'Best Buys', 'Hot Deals' and a privilege card which offers additional perks and free gifts.
Retailers expect more belt tightening at this year's GSS
By SARA LIM
(SINGAPORE) As Singaporeans tighten their belts amid higher inflation and concerns about a slowing economy, mass and mid-market brands are expecting to do better than their luxury counterparts in this year's Great Singapore Sale.
'With a less vibrant economic outlook, consumers are more inclined to spend cautiously at mass and mid-priced boutiques with more savings, rather than on luxury items,' said a spokesman for Wing Tai, which distributes popular fashion brands such as Topshop and Fox.
While the distributor was unable to provide any figures, it is 'conservatively optimistic' that overall sales this year will be higher than last year's. It expects new stores added to its mass and mid-market chains - G2000, Topshop, Dorothy Perkins, Ms Selfridge and Warehouse - to perform well.
On the overall retail scene, however, expectations for this year's sale are less rosy compared with 2006 and 2007, when strong consumer confidence and economic growth kept cash registers ringing. Takings during the sale period in June and July last year totalled $5.5 billion, up from $4.9 billion for the same period in 2006.
'While takings from the GSS might not necessarily fall, I would expect growth to slow compared with the same period last year, when we saw retail sales jump more than 15.4 per cent in June,' said Citigroup economist Kit Wei Zheng.
Mr Kit cited the 'artificial' surge in purchases of big-ticket items ahead of the two-point GST hike and lower consumer confidence in July last year as reasons for his less sunny outlook.
He also warned: 'Rising costs of living could continue to erode the purchasing power of households, and may be a drag on retail sales volumes.'
Retailers are hoping that deep discounts and other promotions available during the sale will entice more cost-conscious shoppers to hunt for bargains.
'Certainly, people are understandably more cautious about their spending, but this is exactly why they should take advantage of the Great Singapore Sale for the great buys and great value, and benefit from the savings that they can achieve,' said Lau Chuen Wei, executive director of the Singapore Retail Association.
Andre Lobo, senior advertising and promotions manager of mall operator Frasers Centrepoint Malls, agreed. 'Shoppers will respond to real bargains and attractive offers which will translate into overall savings, especially with the rise in the cost of living,' said Mr Lobo.
Frasers Centrepoint will offer a 7 per cent rebate in the form of shopping vouchers at its seven malls, including its flagship, The Centrepoint, at Orchard Road.
Mall operators in particular are pulling out all stops to draw the crowds.
Instead of relying on the usual lucky draw prizes to attract shoppers, CapitaLand Retail, is bringing six giant robots developed by the creators of science fiction film E T to its IMM, Junction 8 and Plaza Singapura malls.
CapitaLand hopes that the robots, which will appear in Asia for the first time, will 'provide education through entertainment'.
Shoppers at Frasers Centrepoint malls will be treated to stand-up comedy acts by Hossan Leong and Pamela Oei of the Dim Sum Dollies and have a chance to participate in talent shows hosted by MediaCorp artistes Kym Ng, Chen Li Ping and Pornsak.
As tourists dollars accounted for 40 per cent of retail sales in last year's GSS, retailers also hope that tourists will continue to bolster demand.
With a total of 10.3 million tourist arrivals in Singapore last year, the Singapore Tourism Board (STB) expects the GSS to attract even more visitors. It has been focusing its marketing efforts on the Asia-Pacific and Middle Eastern markets in particular.
'Even as the Singapore dollar strengthens against the US dollar, we hope visitors will continue spending at the GSS with the many promotions and exclusive tourist privileges available,' said Andrew Phua, the STB's director of cluster development, tourism shopping and dining.
Visitors will be treated to exclusive privileges, including a range of 'Best Buys', 'Hot Deals' and a privilege card which offers additional perks and free gifts.
More analysts sanguine about US economy
Business Times - 19 May 2008
More analysts sanguine about US economy
They cite strength of recent data, but others caution against reading too much into it
(WASHINGTON) A growing number of analysts are expressing confidence that the worst may be over for the US economy, even if it struggles for some time due to weak housing, tight credit and high energy costs.
The latest data suggests that the world's biggest economy may have averted a calamitous downturn, and could even escape a recession, by the most common definition.
'The US economy continues to labour under the adverse effects of three powerful shocks: the housing slump, the credit crunch, and the spike in energy prices,' says Josh Feinman, chief economist of Deutsche Bank's DB Advisors. 'Remarkably, the economy has been able (barely) to keep its head above water despite all the negative shocks, a testament to its underlying resiliency, an aggressive policy response, and the relative strength of global growth.'
He predicts that the US economy, which saw sluggish growth at a 0.6 per cent pace in the past two quarters, will see a pickup to a one per cent pace in the second quarter and 2 per cent in the July-September quarter. He sees a softening to 1.5 per cent expansion in the fourth quarter and then a return to 2 per cent growth in the first quarter of 2009.
Some of the recent economic reports have defied forecasts of a sharp decline in US growth. Retail sales fell 0.2 per cent last month but, excluding vehicle sales, were up 0.5 per cent, suggesting resilience in consumer spending, the backbone of US economic activity.
'We think the economy is beginning to recover after a sharp two-quarter slowdown,' said Bear Stearns economist David Malpass. 'We still don't expect a recession. We think consumer resilience, as shown in April's non-auto consumption and sales data, is likely, not the deeper slump assumed in recession forecasts.'
Spending should get a further lift as the government sends out tax rebates of about US$107 billion in the coming weeks as part of a US$168 billion economic stimulus package.
'The impact of fiscal stimulus is probably the most important issue in the US economic outlook during the summer months,' said Goldman Sachs economist Andrew Tilton. 'A significant rebound in confidence and spending could fan hopes of a quicker recovery, while a failure of the economy to respond to the stimulus would be a significant disappointment to policymakers and the markets.'
New home construction starts rose 8.2 per cent last month to an annual rate of 1.032 million units. Even though the gains were in the multi-family segment and single-family homes slumped, analysts said that it was good news.
The labour market has also held up better than expected, and increased exports helped by a weak dollar have underpinned growth.
The broad US stock market has rebounded some 10 per cent since mid-March, when the Federal Reserve helped support a rescue of investment giant Bear Stearns, which was widely seen as a turning point for the credit crisis and market confidence.
Analysts credit the aggressive cuts in interest rates by the Fed along with efforts to boost liquidity to the troubled finance sector, as well as the government's stimulus package.
Nigel Gault, economist at Global Insight, said that the US economy has shown resilience but that it 'is still too early to turn our thoughts away from recession and towards recovery' as the impacts of the financial turmoil on the economy will linger. Global Insight is predicting a contraction of 0.9 per cent in the second quarter. Largely due to the impact of tax rebates, it sees 2.3 per cent growth in the third quarter and overall yearly growth at a tepid 1.2 per cent.
Paul Kasriel, director of economic research at Northern Trust, cautions against reading too much into recent data. 'Any blue skies you see are likely to be short-lived. The mortgage credit problems are not over. And credit problems in other sectors are just beginning as the housing recession spreads to the rest of the economy.' - AFP
Copyright © 2007 Singapore Press Holdings Ltd. All rights reserved.
More analysts sanguine about US economy
They cite strength of recent data, but others caution against reading too much into it
(WASHINGTON) A growing number of analysts are expressing confidence that the worst may be over for the US economy, even if it struggles for some time due to weak housing, tight credit and high energy costs.
The latest data suggests that the world's biggest economy may have averted a calamitous downturn, and could even escape a recession, by the most common definition.
'The US economy continues to labour under the adverse effects of three powerful shocks: the housing slump, the credit crunch, and the spike in energy prices,' says Josh Feinman, chief economist of Deutsche Bank's DB Advisors. 'Remarkably, the economy has been able (barely) to keep its head above water despite all the negative shocks, a testament to its underlying resiliency, an aggressive policy response, and the relative strength of global growth.'
He predicts that the US economy, which saw sluggish growth at a 0.6 per cent pace in the past two quarters, will see a pickup to a one per cent pace in the second quarter and 2 per cent in the July-September quarter. He sees a softening to 1.5 per cent expansion in the fourth quarter and then a return to 2 per cent growth in the first quarter of 2009.
Some of the recent economic reports have defied forecasts of a sharp decline in US growth. Retail sales fell 0.2 per cent last month but, excluding vehicle sales, were up 0.5 per cent, suggesting resilience in consumer spending, the backbone of US economic activity.
'We think the economy is beginning to recover after a sharp two-quarter slowdown,' said Bear Stearns economist David Malpass. 'We still don't expect a recession. We think consumer resilience, as shown in April's non-auto consumption and sales data, is likely, not the deeper slump assumed in recession forecasts.'
Spending should get a further lift as the government sends out tax rebates of about US$107 billion in the coming weeks as part of a US$168 billion economic stimulus package.
'The impact of fiscal stimulus is probably the most important issue in the US economic outlook during the summer months,' said Goldman Sachs economist Andrew Tilton. 'A significant rebound in confidence and spending could fan hopes of a quicker recovery, while a failure of the economy to respond to the stimulus would be a significant disappointment to policymakers and the markets.'
New home construction starts rose 8.2 per cent last month to an annual rate of 1.032 million units. Even though the gains were in the multi-family segment and single-family homes slumped, analysts said that it was good news.
The labour market has also held up better than expected, and increased exports helped by a weak dollar have underpinned growth.
The broad US stock market has rebounded some 10 per cent since mid-March, when the Federal Reserve helped support a rescue of investment giant Bear Stearns, which was widely seen as a turning point for the credit crisis and market confidence.
Analysts credit the aggressive cuts in interest rates by the Fed along with efforts to boost liquidity to the troubled finance sector, as well as the government's stimulus package.
Nigel Gault, economist at Global Insight, said that the US economy has shown resilience but that it 'is still too early to turn our thoughts away from recession and towards recovery' as the impacts of the financial turmoil on the economy will linger. Global Insight is predicting a contraction of 0.9 per cent in the second quarter. Largely due to the impact of tax rebates, it sees 2.3 per cent growth in the third quarter and overall yearly growth at a tepid 1.2 per cent.
Paul Kasriel, director of economic research at Northern Trust, cautions against reading too much into recent data. 'Any blue skies you see are likely to be short-lived. The mortgage credit problems are not over. And credit problems in other sectors are just beginning as the housing recession spreads to the rest of the economy.' - AFP
Copyright © 2007 Singapore Press Holdings Ltd. All rights reserved.
Consumers demanding better service: survey
Business Times - 19 May 2008
Consumers demanding better service: survey
By OH BOON PING
A MAJORITY of consumers here have quit doing business with at least one company in the past year due to poor service, a survey shows.
The latest Accenture Survey on Customer Service Standards also found that half of the consumers surveyed rate the overall quality of service they received as 'fair' or 'poor/terrible', while 63 per cent said their customer expectations are seldom met.
This was based on a poll of some 300 consumers in Singapore, and the results are similar to an Accenture survey last year in which more than 3,500 consumers in countries including Australia, Brazil, China and the US were polled.
In that survey, 59 per cent of all respondents said they had switched at least one service provider in the prior 12 months due to poor customer service, while the equivalent figure in Singapore was 75 per cent.
About 50 per cent of consumers here felt that service quality was excellent or good - lower than the global figure of 59 per cent.
The latest results come as some 78 per cent of Singaporean consumers have raised their customer service expectations from five years ago, and nearly half said their expectations rose in the past year - significantly higher than the 33 per cent equivalent figure in the global survey.
Woody Driggs, managing director of Accenture's customer relationship management global practice, said: 'Consumers have more information and choices than ever - driving a seismic shift in the balance of power to the consumer and adding to the complexities that companies today face as they seek to attract and retain customers.'
The survey found that the most customer churn occurred in the retail, banking and Internet industries, even though switching providers due to poor services was prevalent across industries here.
Some 32 per cent of respondents said they switched retailers due to poor service, while the figures for the banking and Internet industries were 32 per cent and 24 per cent respectively.
Commenting on this trend, Teo Lay Lim, managing director of Accenture Singapore and Accenture's customer relationship management practice in Asia Pacific, said: 'Few banks and retailers worry about 'churn' the same way a telecommunications company does. Very few companies engage in customer retention programmes proactively. For example, a customer may still retain the bank account, or visit the retailer - and hence the bank or retailer thinks they have not experienced 'churn'. However, the reality is that the share of the wallet may have moved in favour of a competitor.'
The vast majority (89 per cent) of consumers in Singapore also said they expect better service in exchange for spending or purchasing more frequently from a company.
In fact, two-thirds (67 per cent) said they expect 'much better' service for their customer loyalty, compared with only 44 per cent in the global survey.
Ms Teo said the good news to service providers is that price is not the most important thing. 'Accenture's research shows that 69 per cent of respondents said they switched providers because of poor service or product versus 48 per cent who switched because of a lower price. This means that some customers will prioritise service over price in a relationship. Knowing who these customers are will allow a company to provide a higher service level to a customer who chooses to pay a premium for service,' she said.
'This translates into the need to segment customers - because service is not a one-size-fits-all approach if you truly want to excel at it. Service providers need to do it in a way which allows them to actually act on each segment in a differentiated way, so that they are able to translate what they know about the customers into what they do for them. The prize for delivering good service is that Singaporeans will move their business to where the service is better,' added Ms Teo.
Consumers demanding better service: survey
By OH BOON PING
A MAJORITY of consumers here have quit doing business with at least one company in the past year due to poor service, a survey shows.
The latest Accenture Survey on Customer Service Standards also found that half of the consumers surveyed rate the overall quality of service they received as 'fair' or 'poor/terrible', while 63 per cent said their customer expectations are seldom met.
This was based on a poll of some 300 consumers in Singapore, and the results are similar to an Accenture survey last year in which more than 3,500 consumers in countries including Australia, Brazil, China and the US were polled.
In that survey, 59 per cent of all respondents said they had switched at least one service provider in the prior 12 months due to poor customer service, while the equivalent figure in Singapore was 75 per cent.
About 50 per cent of consumers here felt that service quality was excellent or good - lower than the global figure of 59 per cent.
The latest results come as some 78 per cent of Singaporean consumers have raised their customer service expectations from five years ago, and nearly half said their expectations rose in the past year - significantly higher than the 33 per cent equivalent figure in the global survey.
Woody Driggs, managing director of Accenture's customer relationship management global practice, said: 'Consumers have more information and choices than ever - driving a seismic shift in the balance of power to the consumer and adding to the complexities that companies today face as they seek to attract and retain customers.'
The survey found that the most customer churn occurred in the retail, banking and Internet industries, even though switching providers due to poor services was prevalent across industries here.
Some 32 per cent of respondents said they switched retailers due to poor service, while the figures for the banking and Internet industries were 32 per cent and 24 per cent respectively.
Commenting on this trend, Teo Lay Lim, managing director of Accenture Singapore and Accenture's customer relationship management practice in Asia Pacific, said: 'Few banks and retailers worry about 'churn' the same way a telecommunications company does. Very few companies engage in customer retention programmes proactively. For example, a customer may still retain the bank account, or visit the retailer - and hence the bank or retailer thinks they have not experienced 'churn'. However, the reality is that the share of the wallet may have moved in favour of a competitor.'
The vast majority (89 per cent) of consumers in Singapore also said they expect better service in exchange for spending or purchasing more frequently from a company.
In fact, two-thirds (67 per cent) said they expect 'much better' service for their customer loyalty, compared with only 44 per cent in the global survey.
Ms Teo said the good news to service providers is that price is not the most important thing. 'Accenture's research shows that 69 per cent of respondents said they switched providers because of poor service or product versus 48 per cent who switched because of a lower price. This means that some customers will prioritise service over price in a relationship. Knowing who these customers are will allow a company to provide a higher service level to a customer who chooses to pay a premium for service,' she said.
'This translates into the need to segment customers - because service is not a one-size-fits-all approach if you truly want to excel at it. Service providers need to do it in a way which allows them to actually act on each segment in a differentiated way, so that they are able to translate what they know about the customers into what they do for them. The prize for delivering good service is that Singaporeans will move their business to where the service is better,' added Ms Teo.
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