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Manufacturing activity eases a touch in July as trade tensions simmer

THE pace of manufacturing activity in Singapore continued to moderate in July for the fourth straight month, in line with economists' expectations of a slowdown in the second half of the year.

With the US-China trade spat clouding the outlook, manufacturers appeared less bullish about future prospects, according to the latest figures from the Singapore Institute of Purchasing & Materials Management (PMI).

The survey-based PMI, a leading indicator of economic activity, dipped 0.2 point from the previous month to 52.3 in July. This followed a 0.2 point fall to 52.5 in June.

But despite the persistent declines, manufacturing activity still remained in positive territory. A reading of 50 and above indicates growth, while a reading below that indicates contraction.

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The latest numbers in July reflected a slower growth in new orders, new exports, factory output and lower inventory level.

In particular, the stocks of finished goods reached its highest level since February 2011, with a reading of 53.1.

The electronics sector PMI declined 0.3 point from the previous month to record a positive reading of 51.6, attributed to slower growth in new orders, new exports, inventory and factory output.

On a brighter note, the electronics PMI has been expansionary for 24 consecutive months.

According to OCBC economist Selena Ling, the uncertainty surrounding the US-China trade dispute likely played a part in the lowered sentiment.

As Singapore is a small, open economy, it is unlikely to be immune to any escalation of US-China trade tensions, even if there are temporary diversions in manufacturing production chains around the region, Ms Ling added.

But global trade concerns aside, economists said, manufacturing growth was already projected to slow down a notch for the rest of 2018, partly due to the high base effects, as well as the peaking of the electronics cycle.

Singapore’s softer PMI readings in July are in line with most of Asia. Economic heavyweights Japan and China saw their readings slide, while the Nikkei Asean Manufacturing PMI fell from 51.0 in June to 50.4 in July.