Manufacturing expands for 18th straight month, but pace slows

Workers at a refrigerator compressor factory. Last month's lower electronics reading came on the back of slower growth in both factory output and new orders.
Workers at a refrigerator compressor factory. Last month's lower electronics reading came on the back of slower growth in both factory output and new orders.ST FILE PHOTO

February reading dragged lower by electronics manufacturing sector

The pace has eased a touch, but the manufacturing sector is still powering along after a rousing start to the year.

The key Purchasing Managers' Index (PMI) - an early indicator of factory activity - came in at 52.7 for last month - the 18th consecutive month of improvement, with more tipped to come.

A reading of 50 and above indicates expansion. Last month's number was a notch below the 53.1 recorded in January, which was the highest reading since December 2009. The Singapore Institute of Purchasing and Materials Management, which compiles the PMI from a monthly poll of purchasing executives in about 150 industrial companies, said yesterday that last month's reading "was dragged lower by the electronics manufacturing sector, on the back of the moderating non-electronics sectors".

The electronics sector's PMI came in at 52.1, its lowest in eight months, and down from January's 52.9.

Last month's lower electronics reading came on the back of slower growth in both factory output and new orders. Slower growth was also recorded in imports, input prices, employment and new exports.

Still, it was the 19th straight month of expansion for the sector.

PMI readings around the region were mixed. Factory activity picked up in Vietnam and slowed in Taiwan and Japan, though both PMIs remained expansionary. Malaysia fell back into contractionary territory with a reading of 49.9 last month, down from January's 50.5.

PMI readings around the region were mixed. Factory activity picked up in Vietnam and slowed in Taiwan and Japan, though both PMIs remained expansionary. Malaysia fell back into contractionary territory with a reading of 49.9 last month, down from January's 50.5.

OCBC economist Selena Ling said data in January and last month might have been skewed by the Chinese New Year festive season, but this month should offer more clarity on how the manufacturing sector is really doing.

Some moderation in growth is anticipated, especially as January's strong showing was likely the result of factories front-loading ahead of Chinese New Year, Ms Ling noted.

"Looking ahead, we do not expect that the double-digit expansion in manufacturing output can be sustained," she said.

Still, "industry news suggests that Applied Materials Inc, the largest supplier of machinery used to make semiconductors, remains bullish on future demand, citing sustainable market strength amid a fundamental shift in the demand for semiconductors and displays".

A version of this article appeared in the print edition of The Straits Times on March 03, 2018, with the headline 'Manufacturing expands for 18th straight month, but pace slows'. Print Edition | Subscribe