SINGAPORE - Activity in Singapore factories expanded at a slower pace last month, as the key electronics sector cooled, an industry survey showed on Tuesday (Aug 2).
The July reading of the Singapore Purchasing Managers' Index (PMI) came in at 50.1, 0.2 point lower than the previous month. It is now just above the 50 line, with any reading below that representing a contraction.
While the latest figure marks 25 consecutive months of expansion for the sector, it signals that the second half of the year is starting on a slightly dour outlook for manufacturers, said the Singapore Institute of Purchasing and Materials Management (SIPMM), which publishes the index.
"The sector continues to face global headwinds as high inflation hit almost all advanced economies," said SIPMM vice-president for industry engagement and development Sophia Poh in a statement.
"This further aggravates the costly disruptions on global supply chains due to the pandemic, as well as the prolonged uncertainties arising from the Russia-Ukraine conflict," she said.
The latest PMI reading was attributed to slower expansion rates in the key indexes of new orders, new exports, factory output and employment.
The index of new orders recorded its lowest reading since September 2020 as well.
Meanwhile, the electronics sector PMI also saw slower growth at 50.5, down 0.3 point from the previous month.
The latest sector reading was also attributed to slower expansion rates in the key indexes of new orders, new exports, factory output and employment, as well as a faster contraction in the inventory index, SIPMM said.
But the supplier deliveries index reverted to a slight expansion after contracting for four consecutive months.
OCBC Bank chief economist Selena Ling said: "(This) suggests some easing up in the supply chain shortage, but the slowing expansion in imports, input prices and order backlog point to demand conditions also wavering."
Ms Ling, who is also the bank's head of treasury research and strategy, added that the figures are not surprising.
"First, global manufacturing PMIs have been rolling over, especially in North Asia led by China, South Korea and Taiwan, whereas Asean manufacturing PMIs have been relatively more resilient as domestic demand recovers with the re-opening of their economies," she said.
"Second, domestic manufacturing momentum has also been steadily losing steam in recent months and the latest business expectations survey revealed that domestic manufacturers have turned net bearish on the second half outlook."
She added that global growth prospects have also deteriorated in the past one to two months, given heightened recession and hard landing fears for the United States, euro zone, Britain and China amid the aggressive tightening of financial conditions.
This is especially with the US Federal Reserve doing back-to-back rate hikes in June and July.
"Singapore's recent industrial production data had already reflected a moderation in the orderbook and growth momentum in the domestic electronics - especially semiconductors - and pharmaceutical clusters," she said.
But the silver lining is that the transport engineering, particularly aerospace segment, and precision engineering - notably the precision modules and components - still remain upbeat for now even though they can't offset the weakness in electronics and biomedical industries, she added.
