October's Purchasing Managers' Index (PMI), which indicates forward orders at factories, fell 3.7 points to 45.8 - a bigger decline than expected.

Economists expected a contraction given the global financial crisis, but the sharp plunge suggests that Singapore's manufacturing sector may be headed into a deeper slump than anticipated.

A PMI reading below 50 is a contraction, while one above 50 indicates output is expanding.

CIMB-GK economist Song Seng Wun said: 'The good news is that the numbers are not worse than what the regional and global manufacturing indicators have shown so far.

'The bad news, however, is that this simply confirms that we are facing a synchronised global slowdown in manufacturing activities.'

Manufacturing indicators across the world have slumped in recent days. The United States factory index fell to a 26-year low while China's PMI and a global manufacturing PMI both plummeted to never-before-seen depths.

Barclays Capital economist Leong Wai Ho said that with consumer and business confidence at all-time lows, the manufacturing weakness will continue through early next year for Singapore.

This was the PMI's second consecutive month of decline. It fell 1.1 points in September, reversing three straight months of expansion.

Yesterday's numbers were the lowest since the Sept 11, 2001 terrorist attacks.

The decline was all round with new orders falling 5.8 points to 44, thanks to weaker domestic and overseas demand. New export orders lost 4.1 points to 44.8 and production output shrank 5.5 points for a 45.4 reading.

The electronics sector also contracted - down four points to 49 after four consecutive months of expansion. New order intakes in electronics also declined for the first time in both local and overseas markets after more than two years of expansion.

The executive director of the Singapore Institute of Purchasing & Materials Management

(SIPMM), Ms Janice Ong, said 'anecdotal evidence of the survey suggested that there has been a spate of order cancellations in the recent weeks...causing companies to cut back production drastically'.

The SIPMM compiles the PMI numbers.

One sector that economists are looking to for some reprieve for embattled manufacturing is pharmaceuticals. With a rebound in the industry expected, economists say the volatile sector may provide a much needed lift to the economy, to give better fourth-quarter growth numbers than the third.

chanckr@sph.com.sg