Few signs of an upturn ahead

Around this time of the year, factories in Singapore usually start ramping up production to prepare for a surge in demand at the year end.

This year, however, sentiment is significantly more subdued and manufacturers are buckled up for another slow year.

Singapore's manufacturing sector, which has already suffered more than a year of shrinking production, has been hit hard by slowing demand amid a lacklustre global economy.

The Purchasing Managers' Index - an early indicator of manufacturing activity - shrank for the 12th straight month in June, logging a reading of 49.6. A reading below 50 indicates contraction.

There are few signs of a turnaround ahead.

Global growth is still stuck in the doldrums, and China - the region's top economic powerhouse - is still struggling to manage its transition from an investment- and export-led economy to being more dependent on domestic demand.

The recent Brexit vote has only added to the uncertainty, roiling global markets and casting doubt over the long-term viability of the European Union.

For small and open Singapore, these factors point to a muted second half of the year.

The export-dependent manufacturing sector, which makes up a fifth of the economy, has been the hardest hit so far. But spillover effects on other sectors, such as services, are likely, given the persistence of the slowdown.

Some sectors, such as legal and financial services, are already feeling the strain. Singapore's growth forecast for this year has already been cut multiple times since January, and some economists believe more cuts could be in store.

Similarly, watch out for the export data, as well as factory data, for further signs of weakness.

At stake are not just the gross domestic product numbers but also jobs - the manufacturing sector has continued to see large numbers of layoffs over the past year.

We are not in a full-blown recession, but prepare for more bumps on the road ahead.

A version of this article appeared in the print edition of The Straits Times on July 07, 2016, with the headline 'Few signs of an upturn ahead'. Print Edition | Subscribe