Singapore private sector business picks up strongly in August on domestic demand, but export orders continue to fall

Two man fish next to a container port in Singapore on Aug 17, 2016. PHOTO: AFP

SINGAPORE - The health of Singapore's private sector economy improved in August, with both output and new orders rising further and at faster rates than in July, according to the latest Nikkei Singapore Purchasing Managers Index.

However, the data also showed that the upturn was largely driven by improved domestic demand, as new export business fell for the sixth month in a row.

Nonetheless, stronger overall demand and a solid accumulation of outstanding work led firms to increase their staffing levels for the first time since February.

The Nikkei PMI rose from 50.7 in July to 52.3 in August to signal the fourth successive monthly improvement in overall operating conditions.

Readings above 50.0 signal an improvement in business conditions on the previous month, while readings below 50.0 show a deterioration.

The rate at which overall conditions strengthened, though modest, was the joint-fastest recorded since January (on par with June). The pace of new order growth improved to a 17-month high.

Commenting on the data, Ms Annabel Fiddes, economist at IHS Markit, which compiles the survey, said: "PMI data indicated that Singapore's private sector stepped up a gear in August. Output rose solidly, helped by the strongest rise in total new work for nearly a year and a half. This translated into some much welcome news for the labour market, with firms increasing their headcounts for the first time in six months.

"Demand from overseas remained weak, however, with export sales declining for the sixth month running. Therefore, it appeared that stronger domestic demand supported the latest rise in new work, as challenging global economic conditions continue to weigh on new export business.

"A solid increase in backlogs of work meanwhile suggests that Singaporean private sector firms may raise output further in the coming months, particularly with purchasing activity moving back into growth territory."

IHS Markit has forecast that Singapore's GDP will expand by 1.7 per cent in 2016.

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