Growth in Singapore's private sector cooled last month on the back of slower output and fewer new orders, according to the Nikkei PMI survey yesterday.
It noted that foreign demand for local goods and services tapered off amid broadly stagnant employment while cost inflation slowed substantially, which led companies to lift charges only marginally.
The headline Nikkei Singapore Purchasing Managers' Index (PMI) eased to 51.4 last month from 52.6 in April, said IHS Markit, which compiles the survey.
The latest reading - while still signalling a modest improvement in the private sector - is the joint-lowest since last October.
The report said signs of slowing client demand emerged last month, after a solid start to the second quarter. Growth in order book volumes eased to the lowest in 10 months, matched by a similar slowdown in exports.
Citing anecdotal evidence, the report noted that difficult economic conditions and higher competition contributed to the slower rise in total new sales, while greater foreign demand from China and Europe were offset by lower export growth to South-east Asia.
Workforce numbers barely rose in May following six months of solid increases in employment, added IHS Markit. This marked the weakest pace of growth since a decline was reported last October. Survey respondents said most additional hiring was for temporary staff. There were also reports of layoffs.
Despite slowing growth in business activity, the private sector signalled greater confidence in the year ahead on the back of planned expansions, new marketing strategies and wider product variety.
This pushed the survey's future output index to its highest level since last September.
IHS economist Bernard Aw said: "Decreasing pressure on operational capacity amid slower growth in demand may see Singaporean companies cautious about taking on more employees in the months ahead. The latest survey data raised concerns that Singapore's economic growth may decelerate in the second quarter, which added to the view that Singapore's Ministry of Trade and Industry is right to be cautious about uncertainties and downside risks to growth."
The Nikkei PMI survey covers sectors of the economy such as services, construction and retail.