Singapore factory activity expands in November but outlook sluggish

SINGAPORE — Factory activity in Singapore expanded marginally last month, helped by modest gains in new orders, new export orders, and production, with analysts saying growth in the manufacturing sector is likely to remain sluggish amid global uncertainties.

The Purchasing Managers’ Index (PMI) rose 0.2 point to 50.2 in November from the previous month, showed data from the Singapore Institute of Purchasing and Materials Management (SIPMM) on Friday (Dec 2), marginally above the 50-point mark that separates expansion and contraction.

The new orders sub-index rose 0.3 point to 50.7, the new export orders sub-index added 0.2 point to 50.4, while the production sub-index edged up 0.1 point to 50.3.  The electronics sub-index — which contributes to one-third of the Republic’s manufacturing performance — continued to expand for the fourth straight month but at a slower pace, falling 0.3 point from the previous month to 50.5.

UOB economist Francis Tan said: “The overall performance shows that manufacturing is still stuck in a period of slow growth. The expansion over the past few months has been very cautious and is nothing to cheer about. Looking at the latest industrial production data, it is still at a mixed performance. We are not expecting to see PMI hit 51 points anytime soon, at least for the first half of next year.”

Last week, data from the Economic Development Board showed Singapore’s industrial production rose 1.2 per cent in October from a year earlier, easing from the revised 7.7 per cent expansion in the previous month. The scorecard was uneven, with the electronics and biomedical manufacturing clusters expanding output by 24.6 per cent and 11.3 per cent, respectively, while the marine and offshore engineering segment suffered a 46.9 per cent slump.

External demand remains wobbly going into the new year, weighing on the outlook for the PMI.

“Unless we see a meaningful sustainable recovery in global demand, this marginal growth might drag on. Singapore is not alone, as seen with regional contractions in PMI. There are still plenty of risks hanging with geopolitics – such as the Italian referendum, US President-elect Donald Trump’s pending policies to Asia and Brexit,” CIMB Private Bank economist Song Seng Wun said.

Mr Tan added: “Mr Trump’s presidency and his policy moves may cause a dent in manufacturer’s sentiment for future book orders. The US may not be our top exporting partner, but at the end of the day, it is still an important global player to manufacturers and they will continue to look closely at it.” 

Regionally, PMIs continued their mixed performance. Last month, the PMIs for Vietnam, India, Taiwan stayed in the expansion zone, while the readings for Malaysia and Thailand were in contractionary territory.

In China, the world’s manufacturing hub, the private sector Caixin/Markit manufacturing PMI, which focuses on small and medium-sized firms, fell to 50.9 points from 51.2 points in October. The official China PMI, which mostly covers larger state-owned manufacturers, improved 0.5 point from the previous month to 51.7 points.