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September manufacturing recovers on external demand

SINGAPORE — The Republic’s manufacturing sector rebounded last month as external demand improved following a contraction in August, supported by new phone and gaming console launches, data from the Singapore Institute of Purchasing and Materials Management (SIPMM) showed yesterday.

SINGAPORE — The Republic’s manufacturing sector rebounded last month as external demand improved following a contraction in August, supported by new phone and gaming console launches, data from the Singapore Institute of Purchasing and Materials Management (SIPMM) showed yesterday.

The overall Purchasing Managers’ Index (PMI) reading — which measures manufacturing activity and sentiment — jumped to 50.5 last month from 49.7 in August, returning above the 50-point mark that separates expansion and contraction. August’s PMI reading indicated contraction for the first time this year, sparking concern among economists.

The recovery last month was boosted by a revival of new export orders, which helped the PMI return to an expansionary 50.7, up from 49.8 in August.

“I believe this is the first sign showing that a more sustained recovery is finally here, and it augers well particularly for our electronics sector,” Barclays’ senior economist Leong Wai Ho said. “It corresponds to a similar momentum in North Asia, as increased sales of gaming consoles and iPhone 6 handsets gain further traction in regional production centres including Singapore.”

The PMI reading for electronics rose to 51.9 last month from 50.7 in August, on the back of growth in new domestic and overseas orders, the SIPMM said. The sector’s new export orders index also improved to 51.4 from 50.5, while production expanded to 53.6 from 50.9.

“(These figures) give us more hope that the indicators around October or the early fourth quarter should firm up further,” Mr Leong said, expecting festive demand at the end of the year.

But CIMB economist Song Seng Wun was not as bullish, noting that the rebound in the PMI was merely a normalisation of activities after August when production was affected regionally due to the Hari Raya festivities.

“In fact, the recovery from the lull in August was not as strong as I had hoped, particularly in terms of new orders and order backlog,” he said. “The modest reading suggests that we are not likely to see strong PMI readings in the coming months. We are still seeing recovery in manufacturing in the region, but the see-saw reading is a reminder that a strong, sustainable pick-up is still some way away.”

Order backlog in the electronics sector edged up slightly to 49.5 last month from 49.1 in August.

Mr Song’s comments reflected similarly cautious sentiments voiced last week by economists over the latest industrial production data. Despite a 4.2 per cent on-year expansion in August, the growth was due mostly to a low base in the same month last year, and economists said the recovery of global economy was still uncertain.

“The United States’ strong PMI figures seem to be the only good news out there. Elsewhere, Europe continues to decline and in Asia, PMI readings are mostly down or flat,” Mr Song. “The US economy is helping to support global recovery and this may translate to moderate growth for us. But broad-based recovery is still not on the cards yet.”

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