Singapore factory output up, beating the trend in Asia

Singapore factories kept bucking the regional trend last month as production here ticked up to a two-year high instead of falling, as it has done in most of Asia.

Manufacturers' hiring plans also surged to a 12-year high, strengthening expectations that the past three months have seen stronger economic growth.

But the latest data also hinted at emerging spots of concern, such as lower new factory orders and rising levels of unsold stock.

The Purchasing Managers' Index (PMI), an early indicator of factory activity, rose to 51.7 in June, the highest since April 2011, data yesterday showed.

This beat May's 51.1 reading and economists' tips of 51.0.

It was also the fourth straight month of expansion. Readings above 50 indicate expansion.

Factory employment also shot up to 52.8, the highest reading since January 2001.

This signals that local manufacturers are more upbeat and are acting on hiring plans, said Ms Janice Ong, executive director of the Singapore Institute of Purchasing and Materials Management, the PMI's publisher.

The key electronics PMI also stayed above 50 for the fifth straight month, though it dipped to 51.2 in June from 51.4 in May.

The PMI readings cemented economists' expectations of stronger economic growth in the second quarter. They "highlight that the manufacturing sector is nicely on a recovery path", compared to the first quarter slump, said DBS economist Irvin Seah.

OCBC economist Selena Ling expects the economy to have grown 2.2 per cent in the April to June period from a year ago.

But factory output may dip 0.2 per cent then, showing it is "far from being a key growth driver in the short term".

Also darkening the picture are other lacklustre PMI readings. China's official PMI fell to 50.1 in June from 50.8 in May, while HSBC's alternative index fell to 48.2 in June from 49.2 in May.

This spilled over to the region. South Korea's June PMI fell below 50 for the first time in five months, Indonesia's fell to a four-month low, and Taiwan's shrank for a second month.

Singapore's PMI may belie some softness, said Ms Ling. New local and export orders grew at a slower pace last month from May, while production and inventories rose - the latter to its highest level since 2011. This could result in oversupply.

On the bright side, CIMB economist Song Seng Wun noted that the second quarter is typically a lull for global manufacturing. "Orders should strengthen in the (second) half of the year."