SINGAPORE - Manufacturing activity in Singapore inched up for a third straight month in August, suggesting the worst may be over for the export-dependent sector that has been in the doldrums since the last quarter of 2022.
Singapore’s purchasing managers’ index (PMI), a key gauge of the manufacturing sector’s health, rose by 0.1 point from July to 49.9, building on the rebound from May when the index hit a multi-month low of 49.5 points, the Singapore Institute of Purchasing and Materials Management (SIPMM) said on Saturday.
A PMI reading above 50 indicates expansion; a reading below 50 points to contraction.
The electronics PMI rose by 0.2 point to 49.5, rising for a second month in a row, but still languishing below the 50-point mark for a 13th straight month.
Singapore’s manufacturing output, which accounts for about a fifth of its gross domestic product, has been in recession since October 2022 amid a worldwide slide in demand for electronic goods and slowing global growth.
However, with the PMI now a hair’s breadth from the 50-point mark, SIPMM believes there is a “silver lining” in the still-clouded outlook for the sector.
“These improved PMI readings in recent months indicate possible recovery of the manufacturing sector, despite several uncertainties in the macroeconomic environment and geopolitical development,” said Mr Stephen Poh, executive director at SIPMM.
The August manufacturing PMI data showed that while most sub-indexes were still in contraction mode, they improved from the previous month, including indexes for new orders, new exports, finished goods, imports, inventory and employment. The factory output and order backlog indexes increased above the 50-point threshold.
Still, the supplier deliveries index fell, contracting for a third straight month, and the overall employment index for the manufacturing sector continued to record contractions for a seventh consecutive month.
The latest electronics sector reading was also attributed to slower contractions in new orders, new exports, factory output, inventory and employment, SIPMM said.
While the sector’s finished goods sub-index has been in continuous contraction for about two years, the electronics supplier deliveries index posted expansion for the 14th month.
Singapore’s latest PMI data followed similar improvements in manufacturing activity for some of its top trading partners.
China’s factory activity surprisingly returned to expansion in August, as per the Caixin/S&P Global manufacturing PMI, with supply, domestic demand and employment improving, suggesting the recent efforts by Beijing to revive growth might be having some effect after months of disappointing performance.
Manufacturing in the United States contracted for a 10th straight month in August, but the pace of decline continued to slow, suggesting that the sector could be stabilising at lower levels. US PMI has been stuck below the 50-point threshold since November 2022, the longest such stretch since the 2008 global financial crisis.
In response to the uncertain global economic outlook, Singapore’s Ministry of Trade and Industry in August downgraded its economic growth forecast for 2023 to between 0.5 per cent and 1.5 per cent, from an earlier range estimate of 0.5 per cent to 2.5 per cent.
Enterprise Singapore followed that cut with its own downgrade of exports growth.
Both non-oil domestic exports (Nodx) and total merchandise trade are now expected to contract by 9 per cent to 10 per cent in 2023 due to a worse-than-expected performance to date. In the previous forecast in May, Nodx was projected to shrink by 8 per cent to 10 per cent, and total merchandise trade was expected to contract by 6 per cent to 8 per cent.
