Skip to main content

Advertisement

Advertisement

Manufacturing slows for 13th straight month

SINGAPORE — Manufacturing activity in the Republic shrank for the 13th straight month in July, with uncertainties in the external environment weighing on demand for made-in-Singapore goods, although economists said seasonal factors may help lift the flagging sector towards the end of the year.

SINGAPORE — Manufacturing activity in the Republic shrank for the 13th straight month in July, with uncertainties in the external environment weighing on demand for made-in-Singapore goods, although economists said seasonal factors may help lift the flagging sector towards the end of the year.

The Purchasing Managers’ Index (PMI) fell to 49.3 last month, 0.3 point lower than in the previous month, data from the Singapore Institute of Purchasing and Materials Management (SIPMM) showed yesterday.

The PMI reading has stayed below the 50-point mark that separates expansion and contraction since July 2015.

“The decline in reading was due to lower new orders and new exports, as well as lower factory output. Manufacturing inventory recorded a slower rate of expansion, whereas the finished goods recorded a slightly faster rate of expansion,” SIPMM said.

The key electronics sector surprised with an increase of 0.7 point in its PMI sub-index, although still remaining in contraction territory with a reading of 49.7 points.

SIPMM said there is anecdotal evidence that more electronics manufacturers are less pessimistic, which economists said is a positive development as the sector heads into the seasonally busier part of the year.

This is also consistent with the latest industrial production data, which showed a 19.7 per cent year-on-year expansion in June in output from the electronics cluster.

In particular, semi-conductors reported a 39.1 per cent year-on-year jump in output.

“The latest PMI shows that certain segments of the manufacturing sector are still vulnerable, but electronics is better than before, which is an encouraging sign that there is some optimism for things to pick up further in the coming months,” said CIMB Private Banking economist Song Seng Wun.

DBS economists said in a research note that while the PMI is expected to inch “gingerly higher in the coming months”, this is nothing more than seasonal effects.

“The key point is that this year’s orders could be less than last year’s. So, without a sustained improvement in global demand, it is still a bleak outlook for the manufacturing sector after all,” they said.

Indeed, the road ahead remains challenging for Singapore manufacturers given that there are plenty of headwinds in the external environment, Mr Song added. For one, the impact of Britain’s vote in June to leave the European Union has not hit yet, while the November presidential elections in the United States also add to geopolitical risks.

Ms Selena Ling, head of treasury research and treasury at OCBC Bank, noted global demand for semi-conductors is showing signs of softening, with the North American semi-conductor book-to-bill ratio retreating to parity in June.

“Asian PMI prints are still very mixed, which is symptomatic of the tepid external demand conditions weighing on regional manufacturers,” added Ms Ling, who said that these are indications of a cloudy trajectory ahead for local factories.

Across the region, improvements were seen in the PMI readings for Japan, Taiwan and India, while those of Indonesia, South Korea and Vietnam waned. In China, the official manufacturing PMI dipped to 49.9 in July, while the private Caixin reading rose to 50.6.

Read more of the latest in

Advertisement

Advertisement

Stay in the know. Anytime. Anywhere.

Subscribe to get daily news updates, insights and must reads delivered straight to your inbox.

By clicking subscribe, I agree for my personal data to be used to send me TODAY newsletters, promotional offers and for research and analysis.