Singapore August manufacturing weakens; tepid recovery likely

Author: Nurluqman Suratman

2020/09/04

SINGAPORE (ICIS)--Singapore's manufacturing sector slightly weakened in August as new export orders slowed down, with recovery in factory conditions going forward likely to remain tepid amid subdued external demand.

The country's purchasing manager' index (PMI) for August slipped to 50.1 in August from 50.2 in July, according to data from the Singapore Institute of Purchasing & Materials Management (SIPMM).

A PMI reading of 50.0 and above indicates expansion in manufacturing activity while a number below marks a contraction.

SIPMM's August reading marks the second consecutive month of expansion for Singapore's manufacturing sector.

"The latest PMI reading was attributed to an improvement in new orders index, a faster rate of expansion in factory output, but slower expansion rates in the indexes of both new exports and inventory," SIPMM said in a statement issued late on Thursday.

August’s new orders index rose to 49.9 from 49.5 in July, but the reading remained below the expansion threshold of 50.

The output index for the month rose to 50.6 from 50.2 in July, while the new exports index fell to 50.2 from 50.5.

Singapore's non-oil domestic exports (NODX) have posted two consecutive months of growth in June and July.

"The August PMI readings pointed to a silver lining in the electronics sector, which appeared to provide a needed boost for the overall manufacturing sector to remain on the expansion track," said Sophia Poh, vice president of industry engagement and development at SIPMM.

"Anecdotal evidences suggest that the pro-business measures initiated by the Singapore government have been effective," she said.

The SIPMM August employment sub-index posted a contraction at a faster rate, whereas the supplier deliveries index posted contraction at a lower rate.

The overall employment index for the manufacturing sector has now recorded contractions for seven straight months.

A separate survey conducted by financial information services provider IHS Markit, showed the Singapore economy’s overall PMI remained in contraction mode, with a deterioration in conditions in August.

IHS Markit's PMI for Singapore in August fell to 43.6 from 45.6 in July.

"Much of the decline is potentially due to Singapore’s construction and services (including retail) sectors," said Barnabas Gan, an economist at Singapore-based UOB Global Economics & Markets Research.

"Nonetheless, the expansions in both manufacturing and electronic PMIs signal that a recovery is taking place, and overall GDP is expected to improve relative to the 13.2% year on year contraction in the second quarter of this year," he said.

Focus article and interactive by Nurluqman Suratman

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