Why It Matters

Manufacturing prospects hazy

Singapore's manufacturing sector continued to power ahead last month, racking up its 19th straight month of expansion.

The monthly Purchasing Managers' Index (PMI) gives the bare bones of the story: It edged up to 53.0, from 52.7 in February.

The PMI, based on surveys conducted by the Singapore Institute of Purchasing and Materials Management, is a leading indicator of economic activity. The higher a reading above 50, the faster the rate of expansion for the sector from the previous month.

The electronics sector, which has been leading manufacturing output growth, recorded a 0.3 point rise to 52.4 from February, marking its 20th month of consecutive expansion and the highest reading since April 2011.

The improved figures inspire optimism, but economists remain cautious about the outlook, as new developments could throw a spanner in the works.

For one thing, even as Singapore's manufacturing sector continues to hum along, PMI readings in the rest of the region were mostly down.

Japan's headline PMI numbers fell for a second consecutive month, while China's Caixin PMI dropped to 51 last month from 51.6 the month before - its weakest reading since November last year.

Taiwan, Thailand, Malaysia, Vietnam, South Korea and Indonesia also saw softened manufacturing PMIs.

OCBC economist Selena Ling said this regional trend "clearly suggests some downside risk to regional manufacturing momentum in the months ahead".

The possibility of a trade war is another key reason the economic outlook for manufacturing is still hazy.

With much still up in the air, we will have to wait for the next few months of manufacturing data to get a clearer sense on where the sector is headed.

A version of this article appeared in the print edition of The Straits Times on April 04, 2018, with the headline 'Manufacturing prospects hazy'. Print Edition | Subscribe