Factory activity expands in April for 8th straight month

SINGAPORE — Manufacturing activity expanded for the eighth consecutive month in April, although at a slower rate. Economists expect the expansion to continue, but likely to ease from the earlier months’ pace of growth.

The Purchasing Managers’ Index (PMI) fell slightly by 0.1 point from the previous month to 51.1 points, showed data from the Singapore Institute of Purchasing and Materials Management (SIPMM) on Tuesday (May 2), but still above the 50-point mark that separates expansion and contraction.

The slower rate of expansion was attributed to declining growth rates in new orders, new exports, inventory and employment. However, the declines were cushioned by a faster growth rate of factory activity, the SIPMM said.

The sub-index for electronics — which accounts for one-third of the Republic’s manufacturing performance — fell 0.2 point from the previous month to 51.6.

“After hitting a post-November 2014 high of 51.2 in March, Singapore’s manufacturing PMI finally edged down 0.1 points to 51.1 in April,” said Ms Selena Ling, head of treasury research and strategy at OCBC Bank.

“The April consolidation comes after a blockbuster first quarter where manufacturing production and non-oil domestic exports surprised on the upside, and inventory restocking may have been completed.”

The Republic’s manufacturing PMI performance could not sustain the upswing but is likely to remain in expansionary mode in the months ahead, although the pace would likely ease off, ANZ economist Ng Weiwen said. “China is reverting back to its old but unsustainable investment-led growth model whereas the ‘tech cycle’ seems to be maturing,” he said.

The “domestic slippage” last month is in line with the pullback in regional manufacturing PMIs like China (official and Caixin), Taiwan and Philippines as well, albeit improvements were seen for Malaysia and Indonesia, noted Ms Ling.

“Notably most Asian manufacturing PMIs remain in positive territory in April, with the notable exceptions of South Korea — possibly dragged down by election uncertainties amongst others — and Thailand. Even the US saw its manufacturing ISM (Institute for Supply Management) retreat from 57.2 in March to 54.8 in April.”

Meanwhile, Ms Ling said to not “read too much” into the small pullback in the manufacturing and electronics PMI prints at this juncture. “Looking ahead, given the deleveraging and tightening regulation concerns in China, and ongoing US-initiated trade talks, it remains to be seen if there will be further spillover implications for Asia in the coming months. While we do not expect a V-shape manufacturing recovery in 2017, it also looks like the global semiconductor upswing has more to run.”

In China, the private sector Caixin/Markit manufacturing PMI fell to a seven-month-low at 50.3 points in April, compared to 51.2 points in March. The official China PMI, which mostly covers larger state-owned manufacturers, slid 0.6 point from the previous month to 51.2 points.

Regionally, the PMIs for India and Taiwan stayed in the expansion zone. Malaysia expanded in April from contractionary mode the previous month.