Manufacturing PMI falls further into contraction in June

SINGAPORE - Manufacturing sentiment in Singapore worsened further in June, with the overall Purchasing Manager's Index (PMI) remaining in contraction for the second straight month and the beleaguered electronics sector seeing its eighth straight month in contraction, according to Wednesday's (July) data release by the Singapore Institute of Purchasing and Materials Management (SIPMM).

Singapore's manufacturing PMI was 49.6 in June, down from 49.9 in May and the lowest reading since August 2016, when the index stood at 49.8. A reading above 50 indicates expansion from the previous month, while a reading below that indicates contraction.

June's weaker reading came on the back of first-time contractions in several indicators: new orders, factory output, inventory and employment level. New exports and imports slowed, though remaining in growth territory.

However, the sub-indices for finished goods, input prices and supplier deliveries all saw faster expansion. The order backlog index also improved, though staying in contraction for the ninth straight month.

SIPMM vice-president for industry engagement and development Sophia Poh said that anecdotal evidence suggests that "several manufacturers are working on future growth plans in the midst of the global trade uncertainties".

The electronics sector, which has been particularly hit by trade tensions between the United States and China, saw its PMI decline to 49.2 in June, down from 49.4 in May.

In electronics, new orders, new exports, factory output, inventory and employment level all moved deeper into contraction. Imports expanded at a slower rate.

However, input prices and supplier deliveries rose faster, while the finished goods index saw slower contraction. The electronics order backlog index remained in contraction for the 14th straight month.

PMI readings have been mixed across Asia, with East Asia harder hit. China's Caixin general manufacturing PMI fell into contractionary territory for the first time in five months in June. Staying in contraction were South Korea, where the manufacturing PMI hit a four-month low, and Taiwan, where the reading was the lowest since November 2011.

In contrast, while the overall Asean PMI also slipped into contraction in June, only two of the seven monitored countries - Singapore and Malaysia - were in negative territory. Vietnam and the Philippines saw their PMI readings improve, while Thailand, Myanmar and Indonesia stayed in expansion but at a slower pace than in May.

Despite softening demand, Malaysia's manufacturers' business confidence about the 12-month outlook improved to the highest reading since October 2013, which compiler IHS Market said reflected "positive sales forecasts and planned capacity enhancements".