Factory activity expands for 4th straight month

SINGAPORE — Factory activity in Singapore expanded for the fourth straight month in December, boosted by a surge in output, as well as increases in inventory holdings, new orders and new exports. Economists expect the upward momentum to continue, at least for the first six months of the year, amid a pick-up in activity in key Asian manufacturing hubs as external demand improves.

The Purchasing Managers’ Index (PMI) rose 0.4 point from the previous month to 50.6 in December, showed data from the Singapore Institute of Purchasing and Materials Management (SIPMM) yesterday, above the 50-point mark that separates expansion and contraction.

The production sub-index jumped 0.8 point to 51.1, the new export orders measure rose 0.3 point to 50.7, while the gauges for new orders and inventory both rose 0.2 point to 50.9 and 51.0, respectively.

UOB economist Francis Tan said: “We do not see this performance from the manufacturing sector as a one-to-two-month wonder. The overall PMI was led by the electronics portion. The demand growth for semi-conductors under electronics looks to be sustained. So there is no slowdown for the overall PMI at least for the first half of this year. Now the only thing is to hope for positive spillover to other sub-sectors such as business services.”

The electronics sub-index — which contributes about one-third to the Republic’s manufacturing performance — continued to expand for the fourth consecutive month, rising 0.7 point from the previous month to 51.2 in December.

Manufacturing accounts for about one fifth of the Singapore economy. The strong growth in Singapore’s factory activity was boosted by external demand in the last quarter of the year and the technology sector upcycle, said ANZ economist Ng Weiwen.

“We noted strong manufacturing performance in the region as well in China, Korea and Taiwan. The sustainability of this, however, hinges on the global economic outlook, as well as United States President-elect Donald Trump’s trade policies.

“Until Mr Trump reveals his policies, there will be a lot of uncertainty. The protectionist measures on trade and production would impact business and corporate confidence, and lead to ramifications on economies on the whole,” he said.

Data released last month by the Economic Development Board showed Singapore’s manufacturing output rose 11.9 per cent year-on-year in November, up sharply from 1.2 per cent in October. Four out of the six clusters — electronics, biomedical manufacturing, chemicals, precision engineering — expanded compared to a year ago.

The electronics sector, in particular, posted another double-digit year-on-year growth, bringing the cumulative performance to a growth of 12.8 per cent year-on-year for the first 11 months of last year.