SINGAPORE - Manufacturing conditions improved for a second month from the depths of the coronavirus-induced recession, but remained within contraction territory.

The June reading of the Purchasing Managers' Index (PMI) came at 48 points, up 1.2 points from May, when it rose by 2.1 points. A PMI reading over 50 indicates expansion, while one below 50 shows contraction.

In April, the gauge of industrial activity had dropped to 44.7 - the lowest level since November 2008 during the global financial crisis.

Mr Irvin Seah, senior economist at DBS Bank, said on Friday (July 3) that the PMI report shows that the manufacturing sector will be one of the key drivers of economic recovery and will remain an outperformer this year despite the challenging outlook.

"That said, it will not be a smooth ride. The recovery will be uneven and not all manufacturing clusters will do well," he noted.

The June PMI data marked the fifth month of contraction for the overall manufacturing sector, the Singapore Institute of Purchasing and Materials Management (SIPMM) said on Friday.

The electronics sector PMI rose 1.4 points from April to 47.6, also marking its fifth month of contraction.

"The June easing of Singapore's circuit breaker measures in two phases has enabled more factory operations but weak global demand has held back growth in the manufacturing sectors," said Ms Sophia Poh, vice-president industry engagement and development at SIPMM, which releases the monthly PMI data.

"Local manufacturers are concerned about the declining global demand arising from the pandemic controls and trade disputes of the major economies," she added.

Key PMI sub-indexes that reflected improving conditions for a second month included new orders, new exports, factory output, employment and supplier deliveries. However, all continued to languish in contraction territory.

The inventory index expanded for the second month, whereas the finished goods index reverted to a contraction after expanding in the previous month.

Slower contractions were recorded for the indexes of imports, input prices, and order backlog. The overall employment index for the manufacturing sector has remained in contraction for the fifth consecutive month.

Ms Selena Ling, head of treasury research and strategy at OCBC bank, said Singapore's PMI highlighted the variance in the pace of manufacturing sector's recovery across Asia.

Similar reports this week showed that China, Malaysia and Vietnam are back in expansion territory, however, other economies remained mired in contraction despite some recent improvements, she said.

The transition to phase two of reopening on June 19 means more economic activities have resumed in Singapore.

Globally, more economies have reopened, hence supply chain disruptions are likely to be easing with time as well.

"However, the global demand shock remains and may have more persistent ramifications for the longer-term recovery trajectory," Ms Ling said.

Mr Seah said the pull-back in both non-oil domestic exports and industrial production in May were reminders that the external environment remains challenging, and far less optimistic than what the financial markets are suggesting.

"Though we expect the PMI to recover to above 50 in the coming months, the upside will be curtailed by the subdued global economic conditions," he added.