Singapore Sept manufacturing shrinks for first time since 2020 as outlook dims

Nurluqman Suratman

04-Oct-2022

SINGAPORE (ICIS)–Singapore’s factory activity in September contracted for the first time in more than two years, as external demand continued to be weighed down by the impact of high inflation and interest rates hikes.

The Singapore purchasing managers’ index (PMI) fell to 49.9 in September from 50.0 in August, falling below the 50.0 threshold for the first time since June 2020, data from the Singapore Institute of Purchasing and Materials Management (SIPMM) showed late on Monday.

A reading above 50.0 indicates overall expansion while a reading below that threshold indicates overall contraction in activity.

The decline in overall factory activity was weighed down by the contraction in the electronics sector PMI.

The latter fell for the second straight month to 49.4 in September, after dipping into contraction in August for the first time since July 2020.

Many of the sub-indices within the PMI report fell below 50.0 in September.

The index of new orders came in at 49.9 from 50.1 in August, the first sub-50 print since August 2020, while the production index inched further below 50.0 with a print of 49.8.

The new exports index eased to 50.0 from 50.2 in August.

The other negatives came from the indices of inventory (49.8, from 49.6 in August), imports (49.6, from 49.8 in August) and notably, order backlog, which came in at 49.7 (from 50.1 in August), the first sub-50 print since June 2020, after more than two years of continuous expansion.

UOB Senior Economist Alvin Liew said the latest dip in the September PMI and the back-to-back contraction in the electronics PMI “painted a consistent picture”, based on the latest non-oil domestic exports (NODX) and manufacturing data.

Singapore’s latest NODX data rose by 11.4% year on year in August, with petrochemical shipments abroad expanding by 2.0%.

Overall factory output expanded by 0.5% year on year in August, down from a 0.8% growth in July.

“We see a weaker electronics performance and slowing demand from north Asian economies that could increasingly weigh on NODX momentum and manufacturing activity,” Liew said.

Singapore’s overall economic growth would likely slow significantly next year, Liew added, as the US and European economies, which are key end-demand markets for the country, are projected to enter a recession in the next six to 12 months amid aggressive monetary policy tightening.

Other external headwinds for Singapore include the ongoing Russia-Ukraine conflict as well as potential new variants of COVID-19, said Liew.

“China’s potential rebound from its COVID-19 challenges in 2023 could be a positive factor offsetting some of the downside drivers next year,” he added.

Focus article by Nurluqman Suratman

Thumbnail image: A shot of the Singapore skyline. Singapore’s factory activity in September contracted for the first time in more than two years, with Singapore’s purchasing managers’ index (PMI) falling to 49.9 in September, from 50.0 in August. (Source: Then Chih Wey/Xinhua)

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