Singapore factory growth shows modest uptick

The Purchasing Managers' Index (PMI), a key barometer of economic activity in the manufacturing industry, came in at 50.8 in March, up 0.4 point from February.
The Purchasing Managers' Index (PMI), a key barometer of economic activity in the manufacturing industry, came in at 50.8 in March, up 0.4 point from February.PHOTO: ST FILE

March PMI figure marks 31st straight month of expansion; follows rises in US, China

Singapore's factories finally picked up the pace in March after months of battering from the global slowdown in electronics demand.

The Purchasing Managers' Index (PMI), a key barometer of economic activity in the manufacturing industry, came in at 50.8 last month, up 0.4 point from February.

A reading over 50 indicates expansion, while a figure below this threshold points to contraction.

Last month's reading marks the 31st straight month of expansion.

The Singapore Institute of Purchasing and Materials Management (SIPMM), which compiles the index by surveying around 150 industrial firms, attributed the rosier performance to faster growth in new orders and inventory.

The electronics PMI also edged up, hitting 49.8 last month from 49.5 in February, but maintained the negative streak that started in November last year.

Within the electronics sector, the indexes for new orders and exports continued to contract for the third month, while factory output fell for the fourth month in a row.

The SIPMM noted that last month's improvement in the order backlog index for the whole manufacturing industry was not enough to change the contraction seen in the past six months. This index tracks the amount of manufacturing orders yet to be completed.

Ms Selena Ling, OCBC Bank's head of treasury research and strategy, said the backlog indexes suggest overseas demand has not rebounded. She added that unless business and consumer confidence picks up, neither the electronics sector nor the wider manufacturing industry is likely to be a growth driver for Singapore's economy in this half of the year.

That said, Singapore's PMI figures follow the "tentative economic green shoots" seen in China's and the United States' manufacturing indexes last month.

China's PMI turned a corner last month, rising to 50.8 from 49.9 in February, while the PMI in the US rose from 54.2 to 55.3.

"Pending a convincing resolution of the United States-China trade talks, we would interpret these initial signs as suggestive of spring following a harsh winter," said Ms Ling.

Mr Frederic Neumann, co-head of Asian Economics Research at HSBC, noted that the March PMIs of Japan, South Korea, Taiwan and Malaysia remained under the 50-point threshold.

"The global backdrop continues to look challenging - the contraction in new export orders deepened, led by Europe, and with much of Asia losing further ground," he said.

"March, perhaps, points in the right direction, but there's still a steep hill to climb."

A version of this article appeared in the print edition of The Straits Times on April 04, 2019, with the headline 'Factory growth picks up steam on electronics rally'. Print Edition | Subscribe