Factory activity picks up but outlook still wobbly

Workers at an electronics manufacturing company that makes printed circuit boards.
Workers at an electronics manufacturing company that makes printed circuit boards. ST PHOTO: DESMOND FOO

Singapore manufacturers hit by flagging demand and mounting costs may finally be seeing the light at the end of the tunnel, according to the latest factory data.

However, economists cautioned against over-optimism, given that the outlook remains wobbly, both in the region and globally.

The Purchasing Managers' Index (PMI) - an early indicator of factory activity - rose for the second straight month in June, after sliding for five months.

The latest 50.4 reading follows a score of 50.2 in May. A reading above 50 indicates growth.

Manufacturing, which makes up a fifth of Singapore's economy, has been hit hard by ongoing restructuring, rising business costs and the Singapore dollar's strength, which has made exports pricier. The sector shrank 5.7 per cent over April and May. This was a much weaker showing than the first quarter's 2.5 per cent decline.

The expansion in the PMI last month was attributed to increases in domestic orders, production output and inventory.

OCBC economist Selena Ling said it remains to be seen if the improvement in the electronics PMI can be sustained.

Manufacturers elsewhere in the region have been hit by tepid global demand. The risk of a "Grexit", or Greek exit from the euro zone, also continued to hang over Asia's export outlook.

SEE MONEY

A version of this article appeared in the print edition of The Straits Times on July 03, 2015, with the headline 'Factory activity picks up but outlook still wobbly'. Print Edition | Subscribe