Private sector output up, but pace slows

Office workers walking outside Raffles Place MRT Station in the Central Business District area, on Feb 18, 2016.
Office workers walking outside Raffles Place MRT Station in the Central Business District area, on Feb 18, 2016. ST PHOTO: LIM YAOHUI

Operating conditions faced by Singapore private sector companies improved last month, but at the slowest pace in four months.

The headline Nikkei purchasing managers' index (PMI) for the private sector fell to 51.6 in February. It was 52.5 in January and 52.1 in December. Any reading above 50 signals expansion.

Ms Annabel Fiddes, economist at Markit, said new order books expanded only slightly as the pace of output growth weakened to a 28-month low.

New export works rose at a much slower pace than that seen at the start of the year, she added. Subdued market conditions resulted in "modest employment growth across the sector".

"Unless demand picks up, both at home and abroad, it seems likely that growth momentum will weaken further in the coming months," she said.

The report also noted that overall input costs rose at a modest pace - similar to that seen at the start of the year. This prompted firms to raise prices again last month, and the rate of inflation to accelerate to the strongest in 20 months.

The Nikkei PMI, released yesterday, is based on data compiled from monthly replies to questionnaires sent to executives in more than 400 private sector firms, selected to represent the structure of Singapore's economy, including manufacturing, services, construction and retail.

NO SIGN OF A LIFT

Unless demand picks up, both at home and abroad, it seems likely that growth momentum will weaken further in the coming months.

MS ANNABEL FIDDES, economist

The latest reading contrasts with that of the official PMI representing only factory activity, released a day earlier, which showed that such activity here contracted for an eighth straight month to 48.5 last month, a level last seen in December 2012.

In January, the PMI was at 49, after falling to 49.5 in December.

It was weighed down by weaker activity in the electronics cluster - which has been shrinking since last July.

The reason for the differences in the PMI readings is that the Nikkei PMI also surveyed firms in sectors apart from manufacturing, like services, said ANZ economist Ng Weiwen. The service sector "is still holding up".

A version of this article appeared in the print edition of The Straits Times on March 04, 2016, with the headline 'Private sector output up, but pace slows'. Print Edition | Subscribe