Factory activity powers to eight-year peak in October

An employees works at a production line during a tour of an REC solar panel manufacturing plant in Singapore.
An employees works at a production line during a tour of an REC solar panel manufacturing plant in Singapore.PHOTO: REUTERS

PMI data shows broad expansion across sectors, with electronics the standout

Factories kept humming in October, with manufacturing activity rising for the 14th straight month to hit an eight-year high.

The sector - which makes up a fifth of the economy and has been the star performer this year - is still going strong on the back of broad expansion across most segments, economists said.

That strength was evident in data released yesterday. The purchasing managers' index (PMI) - an early indicator of manufacturing activity - came in at 52.6 last month, up from 52 in September. It was the highest reading since December 2009.

A reading of 50 and above indicates expansion.

DBS senior economist Irvin Seah said the continued uptick in PMI "confirms that the rally in manufacturing continues unabated".

The Singapore Institute of Purchasing and Materials Management, which compiles the PMI from a monthly poll of purchasing executives at about 150 industrial firms, said the numbers showed broad-based expansion across sectors. Manufacturing employment also recorded its second straight month of growth, according to this survey.

If confirmed, it would be a turnaround. Despite its strong growth, the sector has been shedding jobs this year as firms invest in technology. Employment in manufacturing declined by 6,000 in the third quarter of this year.

While most manufacturing segments were buzzing, electronics was once again the standout. PMI for the sector came in at 53.3 last month - down slightly from 53.6 in September but still expansionary.

"Anecdotal evidence from the survey suggests that most electronics manufacturers were concerned about the impact of digital innovations on their businesses," the report added.

The easing in electronics PMI indicates that the sector is entering a seasonal lull, added Mr Seah.

"Still, overall new orders and new export orders are holding up, and this is a multi-year high from a level perspective, which continues to point to a strong performance in the coming months," he noted.

The Ministry of Trade and Industry expects manufacturing to have expanded 15.5 per cent in the third quarter, according to advance estimates, which mainly take into account data from the first two months of the quarter.

UOB economist Francis Tan said yesterday's buoyant data bucked the regional trend: PMIs elsewhere in the region, including Indonesia, Taiwan and South Korea, remained in expansionary territory but edged lower last month. China's official manufacturing PMI for last month missed expectations, coming in at 51.6, down from 52.4 in September.

"(The regional slowdown) could be a seasonal effect, or a result of the electronics cycle peaking," said Mr Tan.

Still, the overall outlook for manufacturing remains positive.

"For the whole year, it's been very much an electronics story in Singapore, but we're now seeing growth broaden out to other manufacturing clusters even as electronics expansion moderates," he said.

"The fact that manufacturing employment continued to grow is also a good sign."

A version of this article appeared in the print edition of The Straits Times on November 03, 2017, with the headline 'Factory activity powers to eight-year peak in Oct'. Print Edition | Subscribe