Singapore firms see modest output pick-up in May, but new orders and exports fall: Nikkei PMI

The Marina Bay area against the CBD skyline on April 26, 2016.
The Marina Bay area against the CBD skyline on April 26, 2016. ST PHOTO: LIM YAOHUI

SINGAPORE - Singapore firms saw a slight improvement in operating conditions in May, with the headline Nikkei Singapore purchasing managers' index (PMI) rising to 50.1 from April's 49.4.

But while conditions were broadly stable, the index was just barely above the neutral 50 mark separating expansion from contraction.

The rate of output expansion quickened to a moderate pace, but total new work fell for the second month in a row, albeit marginally, noted Markit, the financial information services provider which compiles the index.

The Nikkei Singapore PMI is based on data from monthly replies to questionnaires sent to executives at more than 400 private sector firms, selected to represent the structure of the local economy, including manufacturing, services, construction and retail.

A separate PMI index covering just manufacturing and released on Thursday showed factory activity here shrank in May for the 11th straight month as new orders and new exports shrank even as output expanded.

Markit said the "the lack of foreign sales was a key factor weighing on overall new work", noting that new export business continued to shrink, though at a lower pace than in April. Some firms, it said, mentioned weaker demand from Europe and the US in particular.

Said Markit economist Annabel Fiddes: "Operating conditions across Singapore's private sector stabilised in May following a slight deterioration at the start of the second quarter. Companies reported an improvement in the rate of output growth, albeit modest, while total new work fell at a softer pace.

"The data suggest that new business was again hindered by poor foreign demand, with export sales dropping solidly in the latest survey period.

"Sluggish growth, relatively subdued demand and weakening inflationary pressures all leave scope for further stimulus measures to help lift the sector, particularly to help offset the impact of a slowing global economy."

Markit also said anecdotal evidence suggested that lower staff numbers were generally due to companies choosing not to replace voluntary leavers.

Stocks of inputs also declined over May, with the rate of depletion the quickest seen in nine months. Markit said inventories fell due to the increased usage of current stocks to fulfil orders and preferences for lower inventory holdings.

Inflationary pressures appeared to cool across the sector in May, said Markit. Overall input costs rose at a fractional pace that was the slowest in nine months. At the same time, the pace of output charge inflation also softened and was marginal.