Factories see further expansion as electronics bounces back

The Singapore Purchasing Managers' Index rose to 50.3 last month, up from 50.1 in December. But while the upbeat expectations bode well for the overall economy, any disruptions to regional supply chains due to the coronavirus outbreak could have a do
The Singapore Purchasing Managers' Index rose to 50.3 last month, up from 50.1 in December. But while the upbeat expectations bode well for the overall economy, any disruptions to regional supply chains due to the coronavirus outbreak could have a domino effect on Singapore's manufacturing sector, said one analyst. ST FILE PHOTO

But latest PMI survey does not take into account concerns about virus outbreak in mainland China

The manufacturing sector showed more signs of recovery in January, thanks in part to a stronger showing from the electronics segment, a key gauge revealed yesterday.

The Singapore Purchasing Managers' Index (PMI) rose to 50.3 last month, up from 50.1 in December.

A reading over 50 indicates expansion; one below 50 points shows contraction.

The electronics PMI climbed 0.2 point to 50.1, after staying below 50 for 14 consecutive months, data from the Singapore Institute of Purchasing and Materials Management (SIPMM) noted.

Manufacturing employment expanded for the second month in a row after contracting for six straight months, added the SIPMM, which compiles the index.

Improving manufacturing sentiment here is at odds with latest PMI readings across most of Asia. These suggest that factories in the region are bracing themselves for supply-chain disruptions from the coronavirus outbreak in China.

They are also cautious over the expected benefits of the United States-China trade agreement inked last month.

Ms Sophia Poh, vice-president of industry engagement and development at the SIPMM, noted: "The latest PMI survey highlighted the cautious optimism of manufacturers on the phase one trade deal.

"However, the survey did not indicate their concern about the coronavirus outbreak. In view of the accelerated outbreak, I expect that the overall manufacturing sector will be impacted in the next PMI survey."

The indexes for South Korea, Malaysia and Thailand slipped back into negative territory.

The China Caixin Media and IHS Markit PMI manufacturing index also fell. Taiwan was the only other country where sentiment improved.

The return to expansion in Singapore's key electronics sector was helped by gains in new orders and a faster expansion rate in the employment index, among other factors.

The electronics order backlog index reverted to marginal expansion after posting contractions for 20 continuous months, the SIPMM said.

 
 

The manufacturing and electronics PMI readings for January were in line with the positive tone in the quarterly Business Expectations survey by the Economic Development Board (EDB). The survey last week showed a net weighted 12 per cent of manufacturers and 23 per cent of electronics firms anticipated a stronger outlook in the first half of this year.

While the upbeat expectations should bode well for the overall economy, any disruptions to regional supply chains due to the coronavirus outbreak could have a domino effect on Singapore's manufacturing sector, said Ms Selena Ling, OCBC Bank's head of treasury research and strategy.

Some local businesses could also be facing staffing issues after it was reported that 30,000 work pass holders from mainland China have not returned from their Chinese New Year break, she said.

A version of this article appeared in the print edition of The Straits Times on February 04, 2020, with the headline 'Factories see further expansion as electronics bounces back'. Print Edition | Subscribe