Why It Matters

A new pace for Singapore's manufacturing sector

After a heady run last year, Singapore's manufacturing sector seems to have settled into a more moderate pace of expansion, one in line with both public-and private-sector economists' expectations.

Manufacturers recorded their 20th straight month of growth last month, according to the Purchasing Managers' Index out last Wednesday.

The index polls about 150 industrial companies.

A reading of 50 and above indicates expansion. It has fluctuated between 52.6 and 53.1 since October and came in at 52.9 last month, down marginally from 53 in March.

OCBC's head of treasury research and strategy Selena Ling said the dip partly reflects "a small degree of caution that may have crept in recently", though the sector's momentum remains intact.

The broad consensus among economists is that services will emerge as a more important driver of growth in the coming quarters, as manufacturing growth moderates in line with global conditions - particularly the semiconductor business cycle.

The electronics sector - recently the main driver of manufacturing growth - saw its 21st consecutive month of expansion last month. Yet, this was also the third straight month that it grew at a slower rate than overall manufacturing.

 

And the Monetary Authority of Singapore (MAS) has noted that while industry analysts expect global chip sales to "increase by a still-firm 7.4 to 9.5 per cent in 2018", this is nonetheless a step down from last year's surge of about 22 per cent.

So the hope is for no alarms and no surprises.

While trade tensions between the United States and China do pose a risk, the MAS expects the trade-related sectors to continue to anchor Singapore's growth this year.

It is just that, perhaps, the manufacturing picture is now one of slow and steady growth, in contrast to the brisk pace of 2017.

A version of this article appeared in the print edition of The Straits Times on May 07, 2018, with the headline 'A new pace for manufacturing'. Print Edition | Subscribe