Manufacturing outlook a bit brighter

A printed circuit board assembly factory in Singapore. DBS economist Irvin Seah said the outlook for manufacturing, which makes up a fifth of Singapore's economy, is becoming more sanguine on the back of stronger US growth.
A printed circuit board assembly factory in Singapore. DBS economist Irvin Seah said the outlook for manufacturing, which makes up a fifth of Singapore's economy, is becoming more sanguine on the back of stronger US growth.PHOTO: REUTERS

PMI for November inches up slightly on improved domestic and export orders

Singapore's manufacturing sector appears to be gradually picking up again after a long period of sliding production.

Factory output grew for the third straight month in November, after more than a year of contraction.

The Purchasing Managers' Index (PMI) - an early indicator of manufacturing activity - came in at 50.2 last month, up slightly from 50 in October. A reading of 50 and above indicates expansion.

The PMI had been in contractionary territory since June last year, before turning positive in September.

Last month's uptick was attributed to slight improvements in both domestic and export orders.

But manufacturing employment, which has been shrinking since November 2014, remained lacklustre.

  • 50.2

    PMI last month, which was up slightly from 50 in October. A reading of 50 and above indicates expansion.

    50.5

    PMI for the electronics sector last month - down slightly from 50.8 in October but still expansionary. It was the fourth straight month of expansion.

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

The survey also showed PMI for the electronics sector came in at 50.5 last month - down slightly from 50.8 in October but still expansionary. This was the fourth straight month of expansion.

DBS economist Irvin Seah said the numbers "reaffirmed our belief that the economic cycle could be making the turn".

The outlook for manufacturing, making up a fifth of Singapore's economy, is becoming more sanguine on the back of stronger US growth, he said. While there will likely be a lull early next year because of the Chinese New Year, the overall trend "is still up, not down".

PMI data elsewhere in the region was patchy.

China continued to show signs of stabilising as two separate manufacturing polls pointed to better- than- expected growth. The official PMI was 51.7 last month, its strongest pace in more than two years. The Caixin manufacturing PMI, a private survey, fell to 50.9 from 51.2 in October, but beat forecasts of 50.8.

Manufacturers in Thailand, Malaysia and Indonesia reported lacklustre performances, while Vietnam and the Philippines pulled ahead.

Mr Frederic Neumann, co-head of Asian economics research at HSBC, said some PMI data had perked up, especially in the West, but Asia is not getting much of a lift. "Trade remains stalled, and even local demand is treading water."

In addition, regional currencies have weakened in recent months, particularly against the greenback, which has resulted in higher input costs for manufacturers.

"Price pressures are rising without a meaningful bounce in end-demand... That can't be good for margins. And at time when financial conditions are tightening, this is bound to weigh on investment," he added.

A version of this article appeared in the print edition of The Straits Times on December 03, 2016, with the headline 'Manufacturing outlook a bit brighter'. Print Edition | Subscribe