SINGAPORE - Manufacturing activity in Singapore grew for the 19th straight month in January, though the pace of expansion slowed slightly amid uncertainties arising from new Covid-19 variants and geopolitical tensions.
The January reading of the Singapore purchasing managers' index (PMI) came in at 50.6, 0.1 point lower than the previous month, according to data released by the Singapore Institute of Purchasing and Materials Management (SIPMM) on Thursday (Feb 3).
A reading above 50 indicates growth, while one below 50 shows contraction.
The electronics sector PMI also posted a slower expansion at 50.8, a 0.2 point decrease from the previous month. It is the 18th straight month of expansion for the electronics sector.
As the Omicron variant of Covid-19 spreads, Asia is bracing itself for the possibility that new virus variants could darken its manufacturing outlook and set back economic recovery.
Lockdowns amid the wave of Covid-19 infections in mid-2021 upended the region's factories, affecting staffing and sourcing of raw materials.
Other downside risks come from the slowing momentum in major economies such as the United States and China, as well as US-Russia tensions over Ukraine. A war in Ukraine would heat up the rally in crude prices, while the global economy is already contending with rampant inflation.
Ms Sophia Poh, SIPMM vice-president for industry engagement and development, said: "The manufacturing sector braces for the new year with uncertainties arising from new Covid-19 variants, and the geopolitical developments that can disrupt supply chains."
But local manufacturers remain cautiously optimistic that growth will persist in 2022 and that the sector is well positioned to ride out the crisis, she added.
Analysts also remain confident that the manufacturing sector will continue to be a key pillar of Singapore's economic growth in 2022 despite the slower pace of expansion seen in January.
OCBC Bank head of treasury research and strategy Selena Ling said the moderation in manufacturing activity was not unexpected, given the seasonal slowdown into the first quarter after peak Christmas orders.
UOB economist Barnabas Gan noted the marginal decline in Singapore's PMI was in tandem with the January slowdown in PMI readings across key Asian economies such as China, India, Malaysia and the Philippines.
SIPMM said January's overall PMI reading was due to slower growth in new orders, new exports, factory output, inventory and employment.
The indexes of both finished goods and input prices posted quicker expansion rates, while the indexes of imports, supplier deliveries and order backlog recorded slower rates of expansion.
Mr Gan said the expansion of new orders, new exports, factory output, inventory and employment follows Singapore's robust export performance in December when non-oil shipments beat market expectations with an 18.4 per cent year-on-year expansion.
But Ms Ling noted that there are rising areas of concern as the slowing order book is accompanied by declining imports, supplier deliveries as well as rising finished goods stocks, which could be a sign of global supply chain bottlenecks.
"For the electronics industry, the supplier deliveries index has reverted to a contraction (49.8) after three months of expansion, which may suggest that initial hopes of an easing in the global supply chain bottlenecks may still be premature," she cautioned.
The input price index for the overall manufacturing sector rose further to 51.6 in January, though the electronics input price index stabilised at 51.9 versus 52.0 previously. This is also indicative of persistent price pressures and could contribute to corporate profit margins being squeezed if higher costs are not passed on to end-consumers, Ms Ling added.
China's ongoing growth slowdown and zero-Covid-19 strategy may adversely impact export orders, especially for electronics modules and components, she added.