Singapore manufacturing outlook cools in September

SINGAPORE manufacturers' optimism dimmed slightly in September, after seeing an uptick the previous month, according to data released on Tuesday night.

The Purchasing Managers' Index (PMI), a measure of manufacturing sentiment, lost 0.2 point month on month to 52.4. But September still marked the 25th straight month of expansion, with readings above 50 indicating growth in the manufacturing sector.

The employment index ticked up by 0.1 point to 51.1, its highest level since December 2014.

The month-on-month dip in the overall PMI came on lower new orders and lower new exports, as well as slower factory activity, said the Singapore Institute of Purchasing and Materials Management (SIPMM), which compiles the data. Inventories have also fallen to a one-year low.

Input prices and supplier deliveries showed an uptick in the pace of growth, but the rate of expansion was on the decline for imports and finished goods.

"The order backlog index dipped marginally but is heading towards its second month of expansion," the SIPMM added, in its monthly bulletin.

The PMI for the economy's linchpin electronics sector has notched its 26th straight month of expansion - but the index reading fell by 0.6 point to 51.4.

Growth slowed down in key measurements such as new orders, new exports, factory output, inventory and employment, while order backlog shrank again, for the fifth straight month.

September's reading may reflect purchasing managers' popped bubble of hope, even as a pickup in manufacturing sentiment in August followed four months of cooling optimism.

Selena Ling, head of treasury research and strategy, OCBC Bank, said that the overall showing "reinforced our view that the uptick seen in August was temporary and not sustainable".

"With the exception of the August improvement, the manufacturing PMI would have fallen five out of the last six months, and the peak was likely much earlier in January 2018," she said, adding that the electronics PMI is 2.4 points lower than it was one year prior.

The latest SIPMM data comes on the heels of the Nikkei Asean PMI release for September, which showed a reading of 50.5 for the South-east Asian bloc, down by 0.5 point from August.

China's manufacturing sector has inched towards a standstill, with the official PMI falling by 0.5 point to 50.8 in September. The private Caixin PMI came in at 50 - its lowest reading since May 2017.

PMI surveys across the region have yielded a mixed picture on the outlook for the manufacturing sector, as export orders come under pressure.

South Korea snapped a six-month losing streak to register its first improvement in manufacturing sentiment since February, according to Nikkei polls, while Malaysia posted its fourth straight month of growth, Thailand edged up and Japan held steady.

The stabilisation or improvement in regional manufacturing economies "could be due to diverted production as a consequence of the escalating US-China trade spat", noted Ms Ling.

But growth slowed further in Indonesia, Vietnam and Taiwan, even as Myanmar continued to report a contraction in the manufacturing sector on the back of a strengthening greenback.

Ms Ling said of the outlook for Singapore: "Our view remains that the manufacturing and electronics growth momentum will continue to moderate for the remaining months of 2018."

She added that, given the high base for industrial production in September and October 2017, "there remains a risk for industrial production growth to slow further into the next two months".