Singapore factory sentiment falls for straight third month to end-2008 levels

SINGAPORE'S manufacturing sentiment fell for the third straight month in April to its lowest level since November 2008, data on Monday showed, as every segment of the Purchasing Managers' Index (PMI) stood in negative territory amid the crippling Covid-19 pandemic.

The overall PMI reading lost 0.7 point on the month before, to 44.7 points, according to the Singapore Institute of Purchasing and Materials Management (SIPMM), which compiles the monthly early gauge of factory data.

Meanwhile, the sub-index for the electronics industry was dragged down by faster contractions in new orders, new exports and factory output, slipping by 1.3 points to 42.8. The electronics factory output reading has tumbled to its lowest point on record at 38.3 points.

With the PMI, which was launched here in January 1999, readings below 50 points indicate industry shrinkage and those above 50 point to growth. April's index found inventory, employment, finished goods, input prices and order backlog among the key readings in the red.

Sophia Poh, vice-president of industry engagement and development at the SIPMM, said: "Anecdotal evidence suggests that many manufacturers were grappling with order cancellations resulting from the global containment measures of the Covid-19 pandemic.

"The supply chain operating environment has also weakened considerably with the extension of our local 'circuit-breaker' measures that affect production capacity and responsiveness."

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Similarly, ING Asian economist Prakash Sakpal wrote in a morning note: "The extended 'circuit-breaker' measures mean the surprising manufacturing strength shown in the first quarter is poised to be reversed in the current quarter, leaving GDP (gross domestic product) on a path to a record contraction."

Still, Selena Ling, chief economist at OCBC Bank, suggested that job protection and credit schemes that were beefed up for Singapore's two-month quasi-lockdown "have helped to buffer the downside risk in terms of the economic fallout".

She called the decline in the Singapore PMI "more muted" than similar manufacturing barometers around the region. Indeed, readings in Malaysia, Vietnam, South Korea and Japan came in lower than Singapore's in April. Prints have also turned negative in Taiwan, as well as in mainland China, according to the private-sector Caixin poll.

But the fall in input prices and employment gauges "suggest caution is needed for the near-term outlook and also herald impending softness for the domestic labour market", Ms Ling noted, while warning of risks from the return of trade tensions between the United States and China.

A survey from the Economic Development Board found last week that 60 per cent of manufacturers expect business conditions to worsen in the next six months, compared with the first quarter, on the back of weaker external demand and supply chain disruptions.

Said United Overseas Bank economist Barnabas Gan: "The prognosis for Singapore's industrial production remains dim at this juncture... It is highly likely that Singapore's industrial production may contract into the second and third quarter of this year.

"Moreover, Singapore is highly reliant on trade, and further trade headwinds as seen in April's PMI report may portend further softness in export growth over the same period."

OCBC's Ms Ling added that watchers should pay attention to whether upcoming PMI prints bottom out in the low 40s or keep sinking on the extension of the "circuit breaker" in May.