Factory activity improves again, raising hopes of steady rebound

Employees working at the wafer production line at REC Solar ASA manufacturing facility.
Employees working at the wafer production line at REC Solar ASA manufacturing facility.PHOTO: ST FILE

Factory activity rose for the fifth straight month in January, stoking hopes that the manufacturing rebound is gaining momentum after being stuck in a slump for more than a year.

The Purchasing Managers' Index (PMI) - an early indicator of manufacturing activity - posted a reading of 51 in January, up from December's 50.6 reading.

A reading below 50 indicates contraction, while one above 50 points to growth.

The improved reading came on higher factory output, inventory holding, and new orders and exports, said the Singapore Institute of Purchasing and Materials Management, which compiles the PMI.

Notably, manufacturing employment finally reverted to a marginal expansion of 50.2, after recording contractions since November 2014.


  • 50.2

    Manufacturing employment.

  • 51.8

    Electronics cluster.

The PMI for the electronics cluster posted a reading of 51.8, up from December's 51.2.

"The latest readings of the PMI indicate a gradual growth of the manufacturing sector, although the global economy is still fraught with uncertainties," stated the report yesterday.

The steady start to the year tallies with poll results released earlier this week that showed a net 2 per cent of factory bosses here are slightly more upbeat about business prospects for this half of the year.

Mr K.K. Goh, executive director of Ka Shin Technologies, which makes precision components, said: "We are starting to see a little bit of an increase in demand and orders, and I hope it will be a long increase. We are a little bit upbeat, but we are still not too sure whether it is sustainable."

One key source of uncertainty, said Mr Goh, is the United States: "It is pretty unpredictable. We are not too sure if they will be in-sourcing or having aggressive trade relationships with suppliers not located in the US. It depends on whether the Trump administration will put Singapore in favour."

Julius Baer economist Susan Joho noted that the PMI reports for many countries showed improvements in January, "confirming that the current global cyclical upturn will continue to run into the second quarter".

She said: "This development continues to be led by the US, which saw its index shoot up to a new high of 56 points. Good sentiment also persists in Europe and Japan, which continue to recover. China's official PMI remained almost stable (and) in expansionary territory above 50 points for the sixth month now."

OCBC economist Selena Ling, however, was more cautious. She noted that the manufacturing picture in Asia was "more muted", with softer PMI readings in South Korea and the Philippines.

A version of this article appeared in the print edition of The Straits Times on February 03, 2017, with the headline 'Factory activity improves again, raising hopes of steady rebound'. Print Edition | Subscribe