S'pore factory activity returns to slower growth

After a brief bounce in August, the Purchasing Managers' Index, a key indicator of manufacturing activity, returned to slower growth last month.
After a brief bounce in August, the Purchasing Managers' Index, a key indicator of manufacturing activity, returned to slower growth last month.PHOTO: ST FILE

0.2-point dip in September in line with similar trend across Asia and Europe

Singapore's factory activity grew at a slower pace last month, with fewer new orders and new exports, in line with a similar trend across Asia and Europe - a signal that the fallout from the US-China trade conflict may be growing.

After a brief bounce in August, the Purchasing Managers' Index (PMI), a key indicator of manufacturing activity, returned to slower growth last month by dipping 0.2 point to 52.4.

The reading was in line with a consensus forecast of analysts, with the key electronics PMI sub-index dropping 0.6 point to 51.4.

The main drags on the overall PMI were mostly broad-based and arose from lower new orders, new exports, output, order backlogs, inventory, stocks and imports.

Meanwhile, the employment index rose for the manufacturing sector but fell for electronics.

Still, this was the 25th straight month of expansion in manufacturing, indicated by a score above 50 in the index compiled by the Singapore Institute of Purchasing and Materials Management.

The trend of slowing growth is expected to continue, with OCBC Bank's head of treasury research and strategy Selena Ling saying she expects manufacturing and electronics growth to moderate further for the rest of this year.

Part of the reason is that industrial production expanded by more than 14 per cent in September and October last year, setting a high base for year-on-year comparison.

In the latest PMI figures, new orders slipped from 54.4 in August to 54.2 last month, while new exports dropped from 53.2 to 52.9.

Output fell from 53.7 to 53.4, and the inventory index, which slipped 0.1 point to 51.9, was at its lowest recorded reading since August last year. Finished goods and imports grew at a slower rate as well.

But even as most indexes slipped, employment saw its 13th month of consecutive expansion. Input prices, too, posted slightly higher growth.

Electronics imports and finished goods expanded at slower rates, while input prices and supplier deliveries grew more quickly and the order backlog slipped further with a fifth month of contraction.

Singapore's latest manufacturing snapshot comes as growth in factory activity slowed across Europe and Asia last month, with export orders weakening before the latest escalation in the trade war.

Economies like China, Vietnam and Indonesia were hit, with CMC market analyst Margaret Yang saying that China's manufacturing PMI "reflected worsened trade tensions and sluggish export orders, sending shock waves across other Asian economies including Singapore".

A version of this article appeared in the print edition of The Straits Times on October 03, 2018, with the headline 'S'pore factory activity returns to slower growth'. Print Edition | Subscribe