Singapore private-sector growth up in March

PMI rises to 52.2, reaching four-month high on stronger expansions in output, new orders

Growth in the private sector here picked up in March to the highest level in four months on stronger expansions in output and new orders, the latest Nikkei PMI survey showed yesterday.

The headline Nikkei Singapore Purchasing Managers' Index (PMI) for last month rose to 52.2 from 51.4 in February, the highest reading in four months. A reading of 50 and above indicates expansion.

Improved client demand underpinned upbeat business expectations for the first time since December last year, while export sales returned to growth last month, albeit on a marginal upturn.

In response to greater capacity pressures and a brighter outlook, firms raised staff numbers for the fifth successive month in March.

Anticipating higher demand, companies also stepped up buying activity again last month, with the rate of increase the joint-highest in 33 months, on par with last November. This helped Singapore's private sector firms increase the level of preproduction stocks for the first time since February last year.

POSITIVE SIGN

All this helped to boost business confidence. Firms signalled optimism for the first time since December 2016, according to the Future Output Index.

MR BERNARD AW, economist at IHS Markit, on recent pickup of private sector growth.

Stronger cost inflation was seen on the back of increases in input prices and wages. In particular, salary bills rose by the most in four months, with higher payouts for overtime work and commissions highlighted as reasons.

Commenting on last month's survey data, Mr Bernard Aw, economist at IHS Markit, which compiles the survey, said: "Singapore's private sector registered a pickup in growth at the end of the first quarter, on the back of stronger expansions in output and new orders. Export sales also returned to growth.

"All this helped to boost business confidence. Firms signalled optimism for the first time since December 2016, according to the Future Output Index. Brighter expectations led them to continue hiring and stock building.

"However, delving a little deeper into the data revealed some worrying trends. March saw a sharp increase in cost pressures, the steepest in over 31/2 years, as wage inflation gained momentum.

"At the same time, prices charged for Singaporean goods and services rose only modestly, indicating an ongoing squeeze on margins. Unless demand increases further, this could have repercussions on investment and hiring plans in the months ahead."

A separate survey on Monday that covers just the manufacturing sector showed that factory activity expanded for the seventh straight month in March, logging its highest reading since November 2014.

A version of this article appeared in the print edition of The Straits Times on April 06, 2017, with the headline 'S'pore private-sector growth up in March'. Print Edition | Subscribe