Singapore’s manufacturing recovery likely to broaden as it gains momentum
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The PMI rose to 50.7 points in July, up from June’s 50.4 – the 11th consecutive monthly expansion.
PHOTO: ST FILE
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SINGAPORE – The recovery in factory output is likely to become broader-based as it gathers momentum in the months ahead, despite a minor dip in the electronics sector.
The purchasing managers’ index (PMI), a barometer of the manufacturing industry, rose to 50.7 points in July, up from June’s 50.4
A reading above 50 indicates expansion, while one below 50 implies contraction.
The PMI for electronics, a key manufacturing segment, dipped to 51 points from 51.2 in June, but still marked its ninth straight month of expansion.
In contrast, employment stayed contractionary in spite of a mild improvement, whereas supplier deliveries fell after growth in June.
Economists The Straits Times spoke with said the data pointed to a manufacturing recovery that is broader, boding well for economic growth over the full year.
Dr Chua Hak Bin, a senior economist at Maybank Research, said: “The pickup in the overall PMI suggests that the manufacturing recovery is gathering momentum and intact, quelling concerns after June industrial production reverted to a contraction.
“The recovery may be broadening to include non-electronics sectors, given the pickup and divergent performance in the overall PMI.
“This could be a sign that the biomedical sector is turning around, after contracting sharply in the first half of the year.”
OCBC Bank chief economist Selena Ling noted: “On the one hand, the outlook is turning brighter with the future business index seeing a faster increase.
“On the other hand, the contraction in the sector’s employment gauge for two straight months may mean that prospects are waning for manufacturing jobs in the second half.
“This is consistent with earlier data from the business expectations survey for manufacturing, which showed that firms planning to hire in the third quarter had flatlined.”
Another area of concern was the fall posted by the supplier deliveries index.
Dr Chua said: “This suggests that port congestion and shipment delays may remain a headache in the near term and dampen the speed of the recovery.”
Ms Ling agreed, noting that this was the third consecutive month of contraction for supplier deliveries.
She said: “While the electronics recovery still has legs to run, the strength of that rebound may be slightly patchy rather than broad-based.”
UOB associate economist Jester Koh said he was optimistic that the electronics sector’s recovery remained intact in spite of the July hiccup.
He said: “Notably, the dip in the output sub-index reflects lingering headwinds to recovery in electronics production, as elevated global interest rates continued to weigh on investment and consumption activity abroad.
“Ongoing inventory digestion may have also capped the extent of the recovery.
“Underlying end-demand for electronics and semiconductors remained intact, underpinned by the structural boost from generative artificial intelligence-related applications, which has positive spillovers on to the consumer segment.”
This is reflected in the still-expanding electronics sub-indexes for new orders, new export orders and future business.
Mr Koh also expects the electronics sector to benefit from continued monetary policy easing by central banks in advanced economies, as well as positive tailwinds from inventory replenishing and the replacement of obsolete machines.
