Singapore factory activity shrinks for 12th straight month in June

A printed circuit board assembly factory in Singapore. Domestic and export orders shrank last month.
A printed circuit board assembly factory in Singapore. Domestic and export orders shrank last month. PHOTO: REUTERS

12th straight month of contraction comes as global economy continues to be lacklustre

Factory activity shrank for the 12th straight month in June as the lacklustre global economy continued to weigh on Singapore's beleaguered manufacturing sector.

Elsewhere in the region, manufacturing experienced a small lift in some economies but analysts say the uptick will be short-lived and that long-term prospects remain anaemic.

Singapore's Purchasing Managers' Index (PMI) - an early indicator of manufacturing activity - came in at 49.6 last month, down slightly from the 49.8 reading in May. A reading below 50 indicates contraction.

The fall came as domestic and export orders shrank alongside declines in employment and production. The data is compiled by the Singapore Institute of Purchasing and Materials Management, from a monthly poll of purchasing executives at about 150 industrial companies.

Manufacturing, which makes up a fifth of the economy, has been hit hard by tepid global growth and ongoing restructuring. The industry has been in recession for over a year, according to some economists.

SUBDUED MOOD

Domestic business confidence is likely to remain subdued in the near term, especially in the wake of the Brexit-induced uncertainties.

OCBC ECONOMIST SELENA LING

There will be "no light at the end of the Singapore manufacturing tunnel" in this half of the year, said OCBC economist Selena Ling.

"Domestic business confidence is likely to remain subdued in the near term, especially in the wake of the Brexit-induced uncertainties," she added.

DBS economist Irvin Seah said PMI readings are expected to "inch gingerly higher in the coming months" due to seasonal effects, as manufacturers ramp up production to meet orders for the year-end festive season.

However, there could be fewer orders this year than last year.

"Without a sustained improvement in global demand, it is still a bleak outlook for the manufacturing sector after all," added Mr Seah.

Manufacturing showed tentative signs of life elsewhere in the world. Key data in the United States showed positive signs, while South Korea and Taiwan - Asia's industrial bellwethers - logged expansionary PMI readings for June.

"Look closely, however, and it's doubtful there'll be much follow- through," said Mr Frederic Neumann, co-head of Asian economics research at HSBC, in a research note. "China is softening again, global new export orders continue to contract, and new orders in Asia aren't improving. It all feels wobbly. And Brexit isn't helping."

China's official manufacturing PMI edged down in June to reach 50, from the 50.1 logged in May and April.

A separate private survey of China's manufacturing activity - the Caixin Manufacturing PMI - fell to 48.6 last month, from the 49.2 reading in May.

A version of this article appeared in the print edition of The Straits Times on July 05, 2016, with the headline 'Factory activity shrinks in June'. Print Edition | Subscribe