Singapore manufacturing inches towards stabilisation with August PMI at 49.8

Singapore

THE pace of contraction in Singapore's manufacturing sector slowed towards stabilisation in August, as production lines slowly whirred to life in response to local and foreign demand.

Noticeably, the electronics cluster, which forms the bulk of factory output here, reported its first month-on-month expansion after contracting for 13 months.

Purchasing managers' index for the whole sector was at 49.8 in August, up 0.5 from July's, figures published by the Singapore Institute of Purchasing & Materials Management (SIPMM) on Friday showed. This marked its 14th straight month of contraction.

Readings above 50 denote increasing rate of growth from the previous month; those below 50 mean a quickening pace of contraction.

Friday's headline PMI means that the manufacturing sector has been contracting for 14 months. But there are signs it may be heading towards stabilisation as it edges nearer to the 50 mark, said observers.

Furthermore, it comes a day after the Nikkei manufacturing PMI for Singapore, which also hinted at stabilisation in Singapore's manufacturing sector. This latter PMI was at 50 in August, stabilising after a seven-month decline.

OCBC economist Selena Ling said that if the trend continues until year end, manufacturing could present a good report card for the second half of this year. "Nevertheless, our baseline is more for stabilisation rather than continued expansion for manufacturing growth in H2 2016," she said.

SIPMM said that the improvement in August was due to higher new orders and new exports, as well as higher factory output and employment. The index for new orders was at 49.6, an improvement from July's 49 and June's 49.2. Export orders also improved, reaching 49.3 in August. It was at 48.8 in July and 48.9 in June. The production index headed near 50 in August. It was at 49.9, an increase from July's 49.3 and June's 49.4.

Hiring conditions also seemed to pick up, reaching 49.7 in August from July's 49.4. It was at 49.6 in June.

The electronics cluster performed better than the rest of the manufacturing sector in August, reporting a headline PMI of 50.2, up from July's 49.7. This meant that it broke its 13-month cycle of contraction.

"The electronics expansion reading was attributed to new expansion readings recorded in new orders, new exports, and factory output," said the release.