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March manufacturing growth points to potential recovery

Economists see seventh consecutive month of expansion mirroring trend in regional economies

Singapore's manufacturing sector expanded more quickly in March, recording its seventh consecutive month of expansion and thus signalling a possible manufacturing recovery.


SINGAPORE'S manufacturing sector expanded more quickly in March, recording its seventh consecutive month of expansion and thus signalling a possible manufacturing recovery.

The Purchasing Managers' Index (PMI), a leading economic indicator, showed a 51.2 reading - the highest since November 2014, compared to February's reading of 50.9.

March PMI

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Economists described the pickup as encouraging and said it mirrors a trend seen among economies in the region.

The Singapore Institute of Purchasing & Materials Management (SIPMM), which publishes Singapore's official PMI, released the data on Monday.

A reading above 50 indicates expansion in the manufacturing economy, and a reading below that, a contraction.

The pickup in March's overall PMI came from higher levels of new orders, new exports, factory output, inventory and employment. Imports, input prices and supplier deliveries also grew.

Finished goods and order backlog, however, rose more slowly.

SIPMM said: "Manufacturing employment continued to remain on the expansion track, albeit marginally for the third month, and this could signal employment stabilisation.

The PMI for the electronics sector stood at 51.8, up 0.4 point from the previous month; March marked the eighth straight month of expansion, indicating the continued strength of the recovery in this sector.

The uptick was due to higher levels of electronic factory output, new orders, new exports and inventory. Imports, electronics supplier deliveries and order backlog also expanded faster.

Electronics employment and finished goods stocks, however, recorded a slower rate of expansion.

SIPMM said: "The latest readings of the PMI indicated that the local manufacturing sector has managed to sustain gradual growth despite uncertainties in the global environment."

OCBC economist Selena Ling said that manufacturing recovery appears to be taking root in Singapore.

A similar trend has emerged in regional economies such as Vietnam, which recorded 54.6 versus 54.2 previously, the Philippines (53.8 versus 53.6), India (52.5 versus 50.7), Indonesia (50.5 versus 49.3) and Malaysia (49.5 versus 49.4); there was, however, a softening in China's Caixin (51.2 versus 51.7 previously), Thailand (50.2 versus 50.6) and South Korea (48.4 versus 49.2).

Ms Ling said Singapore's latest PMI figure suggests that the manufacturing recovery is not a flash in the pan, and could underpin the recovery of growth in the first half of this year.

"However, as we enter into Q217, political agendas could again threaten to cloud investor confidence, if not the economic outlook.

"Of particular interest would be the Trump-Xi meeting starting this Thursday, where the US-China trade deficit is likely to top the discussion agenda, and any antagonistic moves could engender an outsized financial market reaction in the near-term."

Mizuho Bank economist Vishnu Varathan said that the latest PMI data was not entirely surprising, given more buoyant numbers elsewhere.

He said: "It has been rather sustained and the pickup was somewhat more encouraging. But we must bear in mind that it comes from not only a very low base, but also at a time when commodities have been recovering."

He questioned whether the pace can be sustained going forward, and noted that it may plateau instead.

He said: "We do not want to discount some of the bona fide recovery, but we do not want to deny it as well, as a good part of it is pretty tentative of what's happening in some major economies around the world."