SINGAPORE - Manufacturing in Singapore fell to its lowest level since 2009 last month.
With factories trying to limit their losses from a recession caused by the coronavirus pandemic, a spike in job cuts is a real risk.
The Singapore Purchasing Managers' Index (PMI) declined 3.3 points to 45.4 in March, said the Singapore Institute of Purchasing and Materials Management (SIPMM). It was the second contraction in a row and the lowest reading since February 2009 when the index was at 45 points, SIPMM said in a statement on Friday (April 3).
The electronics sector PMI fell 3.5 points from February to 44.1, which was also the lowest reading since February 2009 and the second month of contraction. The electronic factory output index slipped to 40.9, its lowest point since December 2008.
The Singapore PMI report comes after advance GDP growth estimates show that the economy may have shrunk 2.2 per cent year on year in the first three months of 2020 - the biggest contraction since 2009.
The first quarter slide in growth prompted the Ministry of Trade and Industry to cut its full-year GDP growth forecast to -4.0 to -1.0 per cent, from an earlier downgraded estimate of -0.5 to 1.5 per cent.
Ms Sophia Poh, SIPMM's vice-president for industry engagement & development, said: "The Covid-19 pandemic has greatly impacted the manufacturing sector as companies struggle to contain financial losses from sharp revenue reductions."
The March PMI data for both overall manufacturing and electronics showed faster contractions for key indicators including new orders, new exports, factory output, employment, and supplier deliveries, SIPMM said.
The indexes of finished goods, imports, input prices and order backlog, also shrank.
United Overseas Bank's estimates showed the declines in new exports and employment indexes in March were significant when compared to their three-year averages.
"We are particularly surprised and concerned at the rate of falls especially in Singapore's export and employment indexes," said UOB economist Barnabas Gan.
The data is disconcerting given that Singapore's growth prospects are highly reliant on trade, he said.
According to Mr Gan's estimates,total trade accounted for 201 per cent of GDP in 2019 and was the second-largest globally, just behind Hong Kong at 293 per cent.
Singapore PMI is in line with reports from around the region this week showing almost all purchasing managers indexes falling further below 50, the dividing line between contraction and expansion, according to data released by IHS Markit on April 1.
The Jibun Bank Japan index dropped to 44.8 and South Korea's PMI fell to 44.2, their worst readings since the global financial crisis, according to IHS Markit.
A trough has been reached in China as the Caixin Media and IHS Markit PMI rose to 50.1 in March from 40.3 a month earlier. However, economists caution this was inevitable as people went back to work after an unprecedented shutdown and that a better reading doesn't yet signal a firm rebound.
Mr Irvin Seah, economist at DBS Bank, said: "The drop in Singapore doesn't come as a surprise given the drastic declines in regional PMIs."
"The biggest worry is the decline in the employment index. It could well suggest possible trimming of headcounts ahead," he said.
Mr Seah was however hopeful that the government's Resilience Package announced last month will help mitigate the fallout on employment.
Singapore announced a supplementary budget of about S$48 billion last month, in addition to the S$6.4 billion stimulus package unveiled in the Budget 2020 to cushion the economic fallout.
Governments across the world are forking out billions of dollars to keep businesses afloat and protect jobs, while being forced to impose countrywide lockdowns and restrictions on movements and gatherings to contain the spread of the coronavirus, thus further stifling economic growth.
Ms Selena Ling, head of treasury research and strategy at OCBC Bank, said the anemic PMI readings clearly bear the scars from the Covid-19 pandemic that has disrupted global supply chains and, more importantly, hit global order books hard.
"It is unlikely there will be much respite in the coming months - in fact, given increasing domestic social distancing measures and rapidly rising global Covid-19 infections and fatalities, with the epicentres shifting to US and Europe, the domestic PMIs may continue to slide near-term." Ms Ling said.
"We may start to see manufacturing job losses pick up as well, if the overall economic conditions remain dire and manufacturers ramp up cost cutting measures," she added.