PMI data shows slight uptick in S'pore business activity

Singapore's private sector only just kept its head above water as operating conditions for companies here picked up slightly last month.

The Nikkei purchasing managers' index (PMI), regarded as a proxy for broad business activity, came in at 50.1 in May,in contrast with April's contractionary reading of 49.4.

The slight uptick offered some relief, as April's reading had marked the first time operating conditions had deteriorated since May last year. A reading of above 50 signals an improvement in business conditions while a reading below that indicates contraction.

The index is based on data from monthly replies to questionnaires sent to executives at more than 400 private sector firms, including those in manufacturing, services, construction and retail.

However, as the reading was only fractionally above the neutral reading of 50, observers suggested that the health of the sector was broadly unchanged from April.

A faster rate of output expansion helped to push the headline PMI number into expansionary territory.

Crucially, total new orders declined for the second straight month in May.

Data suggested that "new business was again hindered by poor foreign demand, with export sales dropping solidly in the latest survey period", said Ms Annabel Fiddes, an economist at Markit, the financial information services provider that compiles the survey.

Firms commented on weak foreign client demand, citing Europe and the United States in particular.

Both new orders and new export orders were seasonally adjusted, signalling a markedly reduced level of new work and new export business.

A separate PMI representing only manufacturing activity, released earlier this week, indicated that local factories had suffered their 11th straight month of contraction, with a reading of 49.8, flat from April's reading.

Analysts suggested that companies could do with some help, given the relatively weak global PMIs.

"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," said Ms Fiddes.

A version of this article appeared in the print edition of The Straits Times on June 04, 2016, with the headline 'PMI data shows slight uptick in S'pore business activity'. Print Edition | Subscribe