SINGAPORE – Factory activity ticked up slightly in November, but still remained in the doldrums for the third consecutive month after 26 straight months of expansion.
The purchasing managers’ index (PMI) – an indicator of trends in the sector – came in at 49.8 in November, up 0.1 point on October’s amid a global slowdown in the wake of rising inflation, higher interest rates and supply issues stemming from the Russia-Ukraine conflict.
A reading over 50 indicates expansion; one below that points to contraction.
The electronics sector PMI also recorded a slight uptick of 0.1 point over October’s to 49.2 – the fourth month of decline after two years of continuous expansion.
Ms Selena Ling, chief economist at OCBC Bank, said November’s marginal improvements did not really come as a surprise.
“It is very similar to China’s Caixin manufacturing PMI, which also edged higher to 49.2, and Taiwan and South Korea similarly notched improvements too, whereas the other regional manufacturing PMIs were also softer in November,” Ms Ling added.
She noted that China’s struggle with Covid-19 containment measures suggests that the road ahead may remain challenging, and may impact business confidence and market sentiment regionally.
UOB senior economist Alvin Liew said that the uptick was a surprise, but noted that the indexes remain in sub-50 territory, and it does not change his view of weaker external demand and the electronics down cycle remaining in place.
“We still expect further downside to the PMIs in the last month of 2022, and the weakness to extend at least into the first half of 2023,” Mr Liew added.
“With the faltering 2023 manufacturing outlook and barring external events, such as escalating war in Europe and a deadlier variant of Covid-19, we keep our modest 2023 GDP growth forecast of 0.7 per cent.
“China’s potential rebound from its Covid-19 challenges in 2023 could be a positive factor offsetting some of the downside drivers next year.”
Ms Sophia Poh, vice-president of industry engagement and development at the Singapore Institute of Purchasing and Materials Management, which compiles the index, noted: “Anecdotal evidence suggests that local manufacturers are less optimistic about the economic outlook going into the first half of next year.
“The weaker global demand and China’s Covid-19 containment measures are weighing on domestic demand despite the year-end festive seasons, although there was some respite from lower cost pressures on local manufacturers.”
