Singapore factory activity shrinks for 13th month in a row

The PMI for the electronics sector rose from the previous month, coming in at 49.7. The slower rate of contraction was attributed to improved readings in new domestic and export orders, as well as production.
The PMI for the electronics sector rose from the previous month, coming in at 49.7. The slower rate of contraction was attributed to improved readings in new domestic and export orders, as well as production.ST FILE PHOTO

July's PMI of 49.3 a tad lower than in previous month; employment index also records contraction

Factory activity shrank for the 13th straight month in July as the lacklustre global economy continued to weigh on demand.

Elsewhere in the region, manufacturing performance remained patchy and economists are not optimistic about long-term prospects.

The Purchasing Managers' Index (PMI) here - an early indicator of manufacturing activity - came in at 49.3 last month, down slightly from the 49.6 reading in June. A reading below 50 indicates contraction.

Last month's fall came on the back of shrinking domestic and export orders.

The employment index also slid - it has recorded contraction readings since November 2014 as manufacturers restructure their labour force, according to the PMI report.

The data is compiled by the Singapore Institute of Purchasing and Materials Management from a monthly poll of purchasing executives at about 150 industrial firms.

Manufacturing, which makes up a fifth of the economy, has been hit hard by tepid global growth and restructuring. There were some bright spots in the latest data, however.

The PMI for the electronics sector recorded a rise of 0.7 from the previous month, coming in at 49.7.

The slower rate of contraction was attributed to improved readings in new domestic and export orders, as well as production.

Anecdotal evidence also suggests more electronics manufacturers are becoming less pessimistic, the institute's report said.

However, DBS economist Irvin Seah noted that the improvement "could be nothing more than seasonal effects" associated with the upcoming year-end festivities, as PMIs are not seasonally adjusted.

"Even if the indices pick up in the coming months due to festive season demand, the key point is that this year's orders could be less than last year's. So, without a sustained improvement in global demand, it is still a bleak outlook for the manufacturing sector after all."

OCBC economist Selena Ling agreed the outlook for manufacturers here remains cloudy. Regional PMI data is "still very mixed, which is symptomatic of the tepid external demand conditions weighing on regional manufacturers".

In China, the Caixin Manufacturing PMI bounced, but the official manufacturing PMI slipped back into contractionary territory.

India and Taiwan recorded expansionary PMI numbers, but manufacturers in Indonesia, Japan and Malaysia continue to cut production.

A version of this article appeared in the print edition of The Straits Times on August 03, 2016, with the headline 'Factory activity shrinks for 13th month in a row'. Print Edition | Subscribe