Manufacturing continued to expand in October

SINGAPORE — The Republic’s Purchasing Managers’ Index (PMI) for the manufacturing sector expanded at a faster pace last month, helped by a rise in new orders and higher production levels, which contrasted with developments in the United States and China.

The Singapore Institute of Purchasing and Materials Management (SIPMM), which compiles the index, said its PMI posted a reading of 51.9 last month — an increase of 1.4 points over September.

A PMI reading above 50 indicates that the manufacturing sector is generally expanding, while a reading below that number suggests that activity is waning.

Economists said the continued expansion in the PMI last month, following a rebound in the index to 50.5 in September from 49.7 in August, signalled cautious optimism among local manufacturers.

Barclays senior economist Leong Wai Ho said: “This is a hopeful indication that the stronger US demand is finally trickling down to our manufacturing sector. The pick-up in purchasing activity seems fairly broad-based — a reflection that the sense of caution that pervaded our manufacturers seems to be easing, probably because of low inventories and more new orders.”

The SIPMM attributed the increase in the overall PMI to a further expansion in new orders and new export orders, production output and stockholdings of finished goods.

“Increased stockholdings at this time of the year is normal, given that October and November are also the peak Christmas shipping months,” said Mr Leong.

Employment expanded last month, reversing from a contraction in September, while input prices declined for the fifth consecutive month.

Meanwhile, a separate PMI reading for the electronics sector rose to 52.5 last month, an increase of 0.6 points over September.

Ms Selena Ling, head of treasury research and strategy at OCBC Bank, said the reading of the detailed gauges of the electronics PMI was not so encouraging. “Apart from the finished-goods index, which grew strongly, we note the softening in most of the other sub-indices ... This, we suspect, could suggest that the current momentum is likely to slacken in the coming first quarter in 2015, once the Christmas season is past,” she said.

The higher Singapore PMI readings came about despite signs of weakness in the manufacturing sectors of the world’s two largest economies.

On Monday, financial data firm Markit said its US manufacturing PMI fell to 55.9 last month from September’s final reading of 57.5.

This followed news at the weekend that China’s official manufacturing PMI had dropped to a five-month low last month, despite government support measures aimed at aiding growth.

However, Japan bucked the trend, with the final Markit/JMMA Japan manufacturing PMI rising to 52.4 last month — less than the preliminary reading of 52.8 but higher than September’s 51.7. AGENCIES