Singapore electronics PMI falls in May despite overall uptick in factory confidence

GROWTH in Singapore’s linchpin electronics manufacturing industry could be slowing, as cooling global demand adds to the risks from higher supply costs, the Singapore Institute of Purchasing and Materials Management (SIPMM) warned on Thursday (Jun 2).

Regional manufacturing confidence held up in May, despite continued softness in China’s factory sector. The SIPMM Purchasing Managers’ Index (PMI) inched up by 0.1 point to 50.4 points, from 50.3 in the month before.

The uptick came on the back of faster expansion in new orders, which made up for slower growth in output, employment, new exports and imports. In the monthly gauge of industry sentiment, readings above 50 points indicate an expansion, and those below 50, a contraction.

Still, the manufacturing sector continued to grapple with faster rises in input prices and order backlog in May, while the supplier deliveries index shrank after 12 straight months of expansion.

“Global electronics demand is also beginning to soften amid worries of a growth moderation, even possibly recession in the major economies like the United States,” Selena Ling, chief economist at OCBC, told the press in a note.

The PMI reading for the key electronics industry slid by 0.2 point to 50.5 points, even while clocking its 22nd straight month of expansion. The SIPMM attributed the decline to slowdowns in new orders, new exports, imports and employment, while factory output fell into contraction.

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“This does not bode well for the electronics growth momentum in the coming months if the supply gaps, including the global semiconductor chip shortage, does not ease significantly in the second half of 2022,” said Ling. “Global electronics demand is also beginning to soften amid worries of a growth moderation, even possibly recession in the major economies like the US.”

“Despite continuing growth of the overall manufacturing sector, growth in the electronics industry appeared to be moderating,” said Sophia Poh, industry engagement and development vice-president at SIPMM, who highlighted weaker global demand on the back of factors such as “the massive lockdowns in China and a slowing growth in the European Union”.

China’s official manufacturing PMI remained underwater in May, even though it rose to 49.6 points from 47.4 in April. The private-sector Caixin PMI – which has a higher weight of smaller and external-oriented manufacturers – was up to 48.1, from a 26-month low of 46 in April.

Even with the spillover impact on emerging Asia from the lockdowns in China, however, analysts at Barclays wrote that “price pressures and continued supply bottlenecks were cited across-the-board as greater headwinds for the manufacturing sector than a demand slowdown”, especially as the cost pressures “are unlikely to subside for some time, partly due to margin compression”.

Regional PMIs largely stayed above the key 50-point handle in May, despite some softening.

The S&P Global South Korea manufacturing PMI eased to 51.8, from 52.1 in April, while the au Jibun Bank Japan score fell to 53.3 points, from 53.5 in April. The S&P Global Taiwan manufacturing PMI dropped from 51.7 in April to 50 in May, representing stagnation.

Maryam Baluch, economist at S&P Global Market Intelligence, also reported: “Business conditions across the Asean manufacturing sector improved at a softer rate in May. Anecdotal evidence suggested weaker demand resulted in a slower expansion in new orders and output.”

The S&P Global Asean manufacturing PMI slipped to 52.3 points in May, down by 0.5 point from 52.8 in April, on slower growth in countries such as Singapore, Thailand and Malaysia.

Vietnam was the only South-east Asian market to see its manufacturing PMI improve month on month, rising to a 13-month high of 54.7 in May, from 51.7 points in the month before.

Still, Baluch said in her report: “Asean manufacturers remained confident with firms hopeful that strong demand would support output growth in the next 12 months.”