Better business conditions, but slowing global growth still a concern: Nikkei Singapore PMI

SINGAPORE - Companies continue to see further improvement in overall operating conditions in September, according to the Nikkei Singapore purchasing managers' index (PMI) released on Monday (Oct 5).

The headline PMI came in at 51.4 in September, up from the 50.8 in August. A reading above 50 signals an improvement in business conditions on the previous month.

The expansion in output - marking the strongest pace of improvement posted since February - was due to "new product launches, promotional activities and the initiation of new projects", said Markit, the financial information services provider which compiled the survey.

But the report also found that total new work remained unchanged for the second successive month, which means that new order intakes have now been stagnant or near-stagnant since June.

"The headline PMI signalled the strongest improvement in Singapore private sector operating conditions for seven months in September, with companies reporting a further solid increase in output as they geared up for new projects and promotions," noted Ms Annabel Fiddes, an economist at Markit.

"However, client demand failed to show any signs of meaningful improvement, with total new work stagnating for the second month in a row, while new export business rose only slightly.

"This could translate into weaker growth of output as we head into the final quarter of 2015, with slower global growth also weighing on the overall business outlook."

The Nikkei Singapore PMI is based on data compiled from monthly replies to questionnaires sent to executives in over 400 private sector companies, selected to represent the structure of Singapore's economy, including manufacturing, services, construction and retail.

An official PMI covering just the manufacturing sector, released last Thursday (Oct 1), had showed a further contraction in Singapore factory activity. That index, compiled by the Singapore Institute of Purchasing & Materials Management (SIPMM), fell to 48.6 last month from 49.3 in August.

Singapore's manufacturing sector has been hit hard as restructuring measures kick in, coupled with rising costs and tepid global demand.

The Nikkei Singapore PMI report also found that companies saw a further increase in total costs during September, with the rate of inflation quickening to an seven-month high.

Data indicated that a renewed rise in purchasing prices along with the fastest increase in staffing costs since last November had contributed to greater overall input prices.