July PMI down 0.3 to 49.3 as new orders, exports fall

A FORWARD-LOOKING indicator of Singapore's manufacturing health dipped farther in July, dragged down by fewer new orders and exports.

The headline purchasing managers' index (PMI) for July was at 49.3, down 0.3 from the previous month, said Singapore Institute of Purchasing & Materials Management (SIPMM) on Tuesday.

A reading above 50 signals expanding activity from the previous month, while anything below indicates contraction.

Tuesday's headline reading denotes a 13th straight month of contraction for the sector.

On the other hand, the electronics cluster fared better in July, though still contracting at 49.7. It was at 49.0 in June.

Businesses often take reference from PMI indicators to make future business decisions.

Noticeably, new orders and new export orders - two sub-indicators of how producers might cope in the coming months - continued their slide in July into the third month.

The index for new orders was at 49.0, down from June's 49.2 and May's 49.7. It was at 49.8 in April.

Index for new export orders - a snapshot of how producers might fare in Singapore's trade-reliant economy - was at 48.8 in July, down from June's 48.9, May's 49.4 and April's 49.6.

Irvin Seah, senior economist at DBS, was not optimistic going by these two indicators. "In order for improvements in manufacturing sector to be sustained, we need to see a more pronounced improvement in global demand. And going by these numbers, business outlook seems poor."

Output at factories also worsened in July. It was at 49.3, down 0.1 from June.

Employment was of concern too. It was at 49.4 in July, down from June's 49.6. The indicator has been below 50 since November 2014, as the sector continues to restructure, said SIPMM.

Observers greeted the upturn in the electronics sector with caution. OCBC economist Selena Ling said that global demand for electronics seemed to be softening, as the North American semiconductor book-to-bill ratio - an indicator for the sector's output - has been contracting since March, denoting softer external demand in the future for electronics firms here.