Slowdown in factory activity hints at sluggish start to the year for manufacturers

The latest economic data hints at an inauspicious start to the year for Singapore's factories.

The purchasing managers' index (PMI) - a leading indicator of factory output - came in at 49.7 last month, a decline of 1.1 points over the previous month.

This was its first contractionary reading in nine months.

A reading above 50 indicates an expansion in manufacturing, while one below 50 indicates a contraction.

The decline in the overall PMI was due to slower growth in new orders and new export orders, as well as a decline in production output, stockholdings of finished goods and imports.

The PMI is compiled monthly by the Singapore Institute of Purchasing and Materials Management (SIPMM) from a survey of more than 150 industrial firm

CIMB economist Song Seng Wun said the latest readings suggest that factories here are still struggling, and that the manufacturing sector's recovery might be "losing steam".

Recent manufacturing numbers showed that the chemicals, precision and transport engineering clusters have been a drag in recent months, he added.

The disappointing PMI reading was the result of both cyclical and structural issues, said DBS economist Irvin Seah.

"The recent festive season and upcoming Chinese New Year lull are possible reasons why manufacturers are not in a rush to ramp up production."

However, the dip in the readings is also a sign of the "tremendous pressure" the manufacturing sector is under, both from rising domestic business costs and stronger regional competition, he said.

PMI readings across Asia presented a mixed picture, with giants China and India losing steam while Japan, Korea and Taiwan continued to strengthen.

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