8th straight month of growth in factory sector

Employees working at a wafer production line at REC Solar ASA manufacturing facility in Tuas.
Employees working at a wafer production line at REC Solar ASA manufacturing facility in Tuas.PHOTO: ST FILE

But some analysts see signs that the strong expansion in manufacturing is peaking

The improving global economy has helped to lift Singapore's manufacturing sector but the run of strong growth seems to be showing signs of tapering off.

The purchasing managers' index (PMI) - an early indicator of manufacturing activity - logged its eighth straight month of expansion in April.

The PMI came in at 51.1 last month, a slight dip from March's 51.2 reading. A reading of 50 and above indicates expansion.

Strong global demand for electronics - in particular, semiconductors - has given Singapore's manufacturing sector a shot in the arm since the fourth quarter of 2016.

April's slightly slower rate of expansion was attributed to declining growth rates of domestic and export orders, as well as inventory and employment.

However, the declines were cushioned by an increase in the expansion rate of factory activity.

The data was compiled by the Singapore Institute of Purchasing and Materials Management from a monthly poll of purchasing executives at about 150 industrial companies.

Manufacturing is showing tentative signs of peaking, said DBS senior economist Irvin Seah.

While the declines are marginal, the moderation in domestic and export order growth suggests "some degree of softening demand", he noted.

"It has been a fantastic run for the manufacturing sector but, at some point in time, the growth rate would naturally start to ease off," Mr Seah said.

OCBC economist Selena Ling said that the marginal dip in April came after a "blockbuster" first quarter when manufacturing output and exports surged.

Singapore's latest PMI numbers are in line with a pullback in manufacturing PMIs across the region, including in China, Taiwan and the Philippines, she noted.

But most Asian manufacturing PMIs - except in South Korea and Thailand - remained in positive territory in April.

"While we do not expect a V-shaped manufacturing recovery in 2017, it also looks like the global semiconductor upswing has more to run. So we wouldn't read too much into the small pullback in the manufacturing and electronics PMI prints at this juncture," said Ms Ling.

Mr Allen Ang, group managing director of Aldon Technologies, said his company's revenue rose 15 per cent in the first quarter to reach a two-year record high.

The company refurbishes parts for flat panel and semiconductor producers.

"Last year, many of my customers cut down on investment but, this year, they've started buying capital equipment again.

"That's an indication that they're also feeling good about the market," Mr Ang said.

A version of this article appeared in the print edition of The Straits Times on May 03, 2017, with the headline '8th straight month of growth in factory sector'. Print Edition | Subscribe