Factory activity up for sixth month

The purchasing managers' index (PMI) posted a reading of 50.9 in February, down from January's reading of 51.
The purchasing managers' index (PMI) posted a reading of 50.9 in February, down from January's reading of 51.PHOTO: ST FILE

Factory activity here rose for the sixth straight month in February, if just a tad slower, in line with upbeat manufacturing data across most of the region.

The purchasing managers' index (PMI) - an early indicator of manufacturing activity - posted a reading of 50.9 in February, down from January's reading of 51.

A reading above 50 points indicates growth in the sector, while one below 50 indicates contraction.

Earlier this week, China, Japan and the United States all reported significantly stronger PMI figures. South Korea also reported its best export figures in five years.

However, Malaysia remains in contractionary territory, and Taiwan recorded a strong 54.5, though that was a slower rate.

The dip in the latest Singapore reading was due to a slower rate of expansion in factory output, new orders, new exports and lower imports, said the Singapore Institute of Purchasing and Materials Management, which compiles the PMI.

The bright spot was manufacturing employment, which continued to expand marginally, rising to a reading of 50.3 in February, from 50.2 in January. Prior to that, it had contracted since November 2014.

Perhaps the weakest aspect of the latest Singapore PMI was the electronics cluster, which had a reading of 51.4, down from January's 51.8.

"Nevertheless, the softer February data has to be seen in the context of the January readings, which were the highest since November 2014 (for overall manufacturing PMI) and October 2014 (for electronics PMI)," said OCBC economist Selena Ling.

The slight easing of the PMI in February did not come as a surprise. Expectations had been tempered after January's official industrial production data disappointed last week.

Economic Development Board figures showed that manufacturing output rose 2.2 per cent in January from the same month a year earlier, much lower than the 9.5 per cent expansion tipped by economists.

This was due to an 18.3 per cent contraction in drug production in January, which offset a 14.8 per cent expansion in electronics production.

"It was clear that the manufac- turing recovery was not yet running on broad-based engines," Ms Ling said.

DBS economist Irvin Seah said: "A pull-back is imminent. The rapid pace of expansion in the fourth quarter last year was not sustainable partly due to capacity constraints in some industries, and the Lunar New Year lull in China that stretches into the early bit of February."

He also noted cyclical effects in clusters such as pharmaceuticals, for example, where January's contraction was a sharp reversal from a 53.8 per cent expansion in December.

Nevertheless, economists remain upbeat about the manufacturing sector's growth prospects for the rest of the year.

"It is a glass half-full and not half-empty," said Mr Seah.

Marissa Lee

A version of this article appeared in the print edition of The Straits Times on March 03, 2017, with the headline 'Factory activity up for sixth month'. Print Edition | Subscribe