Singapore's manufacturing shows hints of recovery but worries remain

Workers at Add-Plus, an electronics manufacturing company that makes printed circuit boards.
Workers at Add-Plus, an electronics manufacturing company that makes printed circuit boards. PHOTO: ST FILE

Singapore's manufacturing sector appears to be showing nascent signs of recovery after being stuck in the doldrums for a long period.

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

But economists warned tough times may still lie ahead, given weak global economic sentiment.

Singapore's Purchasing Mana- gers' Index (PMI) - an early indicator of manufacturing activity - came in at 50 last month, down slightly from 50.1 in September. A reading of 50 and above indicates expansion.

Before September's uptick, the PMI had previously been shrinking since June last year.

The slightly weaker reading recorded last month was attributed to slower overall factory output and lower employment, though domestic and export orders logged marginal improvements.

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

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 October PMI survey also showed that the PMI for the electronics sector came in at 50.8 last month - up from 50.3 in September, and the third straight month of expansion.

A recent Economic Development Board poll of manufacturers found that the electronics cluster is the most optimistic about the October to March period, due largely to a seasonal pick-up in demand for semiconductor chips.

"If (the sector) can sustain the growth momentum for another one to two months, then it'll be safe to assume that the worst for manufacturing may be behind us," said DBS economist Irvin Seah.

"Time will tell but the point to note is that the prospects for the manufacturing sector are turning brighter compared with a year ago."

Elsewhere in the world, manufacturing gained pace in the United States, European Union, Japan and China. In particular, China's October factory activity expanded at the fastest pace in over two years. The official PMI stood at 51.2 last month, much stronger than in September and the highest reading since July 2014.

However, the situation in Asean is still far from rosy - largely because trade remains stuck in the doldrums, said Mr Frederic Neumann, co-head of Asian economics research at HSBC.

"We think that structural factors are restraining exports and that activity across Asia will at best limp along for the foreseeable future," he added. "So, don't get too carried away here. Long slog still ahead."

A version of this article appeared in the print edition of The Straits Times on November 03, 2016, with the headline 'Manufacturing shows hints of recovery but worries remain'. Print Edition | Subscribe