SINGAPORE – Factory activity in Singapore inched up for a third consecutive month after a six-month slump, suggesting the export-dependent sector is on track for a sustained recovery.

The purchasing managers’ index (PMI), a barometer of the manufacturing sector, crept higher to 50.3 points in November, from 50.2 in the previous month. Readings below 50 indicate contraction, whereas those above 50 denote growth.

November’s expansion was helped by broad-based improvements across key indicators such as new exports, factory output and employment. 

The electronics cluster broke a 15-month losing streak, gaining 0.2 point to reach 50.1, from 49.9 in October.

New orders and input purchases both entered expansion territory for the first time since August 2022 and July 2022, respectively.

But supplier deliveries remained in the doldrums, recording their sixth consecutive month of contraction, albeit at a slower pace, according to the latest data released by the Singapore Institute of Purchasing and Materials Management on Dec 2.

DBS Group Research economist Chua Han Teng said November’s PMI is a sign that the Republic’s factory activity is gradually recovering, but the upturn within the electronics cluster is still uncertain.

He noted: “For example, new export orders (for electronics) shrank for the 16th straight month, albeit at a slower pace, which indicates soft overseas demand.”

Maybank economist Chua Hak Bin said the recovery in manufacturing can be attributed to a number of factors, including a shift in global consumer spending from services to goods, an ongoing tech cycle marked by upgrades and introduction of new models, as well as a depletion of inventories in the US tech sector.

“The large US fiscal deficit spending and aggressive industrial policy with generous subsidies on semiconductors and electric vehicles are also driving up global electronics demand,” he added.

Singapore’s key non-oil domestic exports (Nodx) is expected to shrink by 12 per cent to 12.5 per cent in 2023, compared with August’s forecast of 9 per cent to 10 per cent, trade agency Enterprise Singapore (EnterpriseSG) said in its latest quarterly review of trade performance.

For 2024, Nodx is projected to rise by 2 per cent to 4 per cent in tandem with an anticipated turnaround in global electronics demand.

EnterpriseSG noted that this demand is expected to gradually recover in 2024, as inventory levels normalise. It added: “This would support total trade and Nodx growth.”

Mr Song Seng Wun, Singapore economic adviser at CGS-CIMB Securities Singapore, said an upswing in the global semiconductor market is expected in 2024, according to data from the World Semiconductor Trade Statistics.

He added that this development is “positive news for Singapore’s electronics PMI and hence overall PMI in 2024”.

In November, the Ministry of Trade and Industry (MTI) said in its quarterly economic survey report that the country’s economic growth for 2023 will come in at around 1 per cent amid weak export demand.

The forecast was narrowed from a range of 0.5 per cent to 1.5 per cent announced in August, and was much lower than the prediction of 0.5 per cent to 2.5 per cent made at the start of the year.

Singapore’s economy grew 3.6 per cent in 2022.

MTI also noted that the Republic’s economy is expected to grow between 1 per cent and 3 per cent in 2024 as trade-related sectors improve modestly.