A FORWARD-LOOKING indicator of manufacturing activity here has contracted for a fourth straight month in a clear sign that factory output is set to kick off 2009 with a whimper.

December's purchasing managers' index (PMI) rose 0.5 points, a fraction above November's record low of 44.3 to register a 44.8 reading, according to figures released on Monday by the Singapore Institute of Purchasing & Materials Management (SIPMM).

A reading below 50 indicates a contraction, while a reading above 50 indicates an expansion. The index is based on a poll of more than 150 purchasing executives.

New orders, new export orders and output all kept shrinking.

Records tumbled as the important electronics sector slumped to a worst-ever 41.8 reading, its third straight month of decline, as almost all indicators shrank.

New orders and production indices for electronics both slipped below 40 - hitting new lows since the PMI was started in January 1999.

Economists say that the overall reading is in line with the expected downturn in manufacturing as global demand grinds to a halt. This is consistent with recent declines in key manufacturing indicators in the United States and China.

The marginal PMI rise here was due to a rebound in the overall stock of finished goods to 54.1 and a continued expansion in overall inventory to 51.2. But rather than spelling good news, these indicators merely confirmed that demand is falling, causing stocks to pile up, economists say.

Ms Janice Ong, executive director of SIPMM said: 'Manufacturers were still hopeful of an increase in demand during the festive seasons and have therefore accumulated their finished goods stockholdings. However, this could be a cause for concern as an overhang of finished goods stock could dampen employment.'

CIMB-GK economist Song Seng Wun said: 'The PMI is off our record low, but we're still in recession territory.

'On the tech side with a seasonally soft first quarter there is a high chance will see even weaker tech figures.'

Credit Suisse economist Joseph Tan said: 'We're going to see things get worse before they get better. It's a very trite statement but that is best way to describe it. We haven't reached the bottom yet.'