Manufacturing PMI up in Aug - for 24th straight month

Analysts said the positive data for August suggests domestic manufacturing is holding up well against global uncertainties like the US-China trade war. Factory output expanded faster last month as well, as did hiring, with the employment index up for
Analysts said the positive data for August suggests domestic manufacturing is holding up well against global uncertainties like the US-China trade war. Factory output expanded faster last month as well, as did hiring, with the employment index up for its 12th consecutive month of expansion.ST FILE PHOTO

New orders and new exports help lift overall Purchasing Managers' Index by 0.3 point to 52.6

Electronics turned in a robust performance in August to help the overall manufacturing sector record its 24th month of expansion.

The Purchasing Managers' Index (PMI) - a key indicator of economic activity - noted that the electronics sector logged a 0.4 point increase in August from July, to 52.0. A reading above 50 indicates expansion.

The increase was due to higher growth rates in new orders, new exports, factory output and employment. That helped to lift the overall PMI by 0.3 point last month to 52.6 - manufacturing's 24th straight month of expansion, according to the Singapore Institute of Purchasing and Materials Management yesterday.

The reading is compiled based on a survey by the institute of purchasing managers in about 150 manufacturing firms.

Analysts said the positive datasuggests domestic manufacturing is holding up well against global uncertainties like the US-China trade war.

August's PMI was boosted by more new orders, which rose from 53.9 in July to 54.4, as well as new exports, which grew from 52.6 to 53.2.

Factory output expanded faster last month as well, as did hiring, with the employment index up from 50.7 in July to 51.0, its 12th consecutive month of expansion.

  • 12

    Number of consecutive months of expansion for the employment index, increasing from 50.7 in July to 51.0 last month.

The inventory level recorded its lowest reading since August last year at 52.0, while the stocks of finished goods grew at a lower rate.

OCBC Bank's head of treasury research and strategy, Ms Selena Ling, said the numbers suggest that domestic manufacturing "is withstanding the deterioration in the external economic environment due to the US-Sino trade war".

Ms Ling added that the data also points to a broadening of manufacturing drivers beyond electronics to pharmaceuticals, especially in the run-up to Christmas.

Global and regional manufacturing PMIs have generally improved as well, with China's official manufacturing PMI edging up from 51.2 in July to 51.3 in August.

She also noted that better numbers have been seen in Malaysia, Indonesia and the Philippines, saying this could be partly due to the economies being "likely beneficiaries from the realignment of regional production lines amid the escalating US-Sino trade war and tit-for-tat retaliatory moves".

However, other surveys of purchasing managers released yesterday as well reflected pressure on the key exporting destinations of China, Japan and South Korea. Last month, China's manufacturing sector grew at the slowest pace in more than a year. Export orders shrunk for a fifth month.

With the next tranche of US tariffs on US$200 billion (S$275 billion) of Chinese imports likely to come into force soon after the public comment period ends on Thursday, Ms Ling said it remains to be seen if the August PMI optimism here will sustain into the fourth quarter of this year.

While the overall PMI has reversed a downtrend in the last few months, CMC Markets analyst Margaret Yang said it remains to be seen if this is one-off.

"We need to look into the details: Where are orders coming from, which sectors, and if they are affected by the US-China trade war," she said.

"If they are not, then the data is very positive, showing that manufacturers' confidence are not hurt by trade tensions and that external demand remains resilient."

A version of this article appeared in the print edition of The Straits Times on September 04, 2018, with the headline 'Manufacturing PMI up in Aug - for 24th straight month'. Print Edition | Subscribe