Slight improvement in business conditions but outlook remains cloudy: Nikkei Singapore PMI

SINGAPORE - Companies experienced a marginal improvement in operating conditions in August, according to the Nikkei Singapore purchasing managers' index (PMI) released on Thursday (Sept 3).

The headline PMI was at 50.8 in August, below July's 51.3 reading. A reading above 50 implies expansion.

"Although new business from abroad improved, overall demand appears relatively muted as total new orders were unchanged from the previous month," said Ms Annabel Fiddes, an economist at Markit, the financial information services provider which compiles the survey.

Although the rate of output growth dipped to a four-month low, "it remained solid overall", the Markit report said. Some of this growth could be attributed to "new product developments and improving client demand.".

The Nikkei Singapore PMI is based on data compiled from monthly replies to questionnaires sent to executives in over 400 private sector companies, selected to represent the structure of Singapore's economy, including manufacturing, services, construction and retail.

An official PMI covering just the manufacturing sector , released on Wednesday, showed that Singapore factory activity shrank in August, for the second month running. The index, compiled by the Singapore Institute of Purchasing & Materials Management (SIPMM), fell to 49.3 last month from 49.7 in July.

Manufacturing, which makes up a fifth of Singapore's economy, has been hit hard by restructuring, rising costs and tepid global demand.

The Nikkei PMI survey found that firmer demand conditions led companies to increase their purchasing activity for the second month in a row in August. The rate of growth, though modest, was the fastest seen in a year.

But Ms Fiddes noted that: "Unless demand conditions start to improve, it's likely that output growth will slow further which could translate into more bad news for the labour market."

"Weaker global growth amid fears of a slowdown in China adds to demand-side concerns, and could dampen the performance of the economy in upcoming months," she said.

The report showed that private sector companies registered a fractional decline in staff numbers in August, following a modest expansion in July. Employment declined largely due to the non-replacement of voluntary leavers.