IN May, Singapore's factory sentiment improved both overall and in the electronics sector for the first time this year, recovering from April's levels, which were the lowest since 2008. But both readings were still in contractionary territory for the fourth straight month, with economists warning that headwinds remain.

The Purchasing Managers' Index (PMI) - an early indicator of factory activity - rose 2.1 points to 46.8 in May, while the electronics sector PMI rose 3.4 points to 46.2. A reading below 50 indicates contraction, and above 50, growth.

The improvements in both overall and electronics PMI were due to slower contractions in the key indexes of new orders, new exports, factory output and employment, said the Singapore Institute of Purchasing and Materials Management (SIPMM) in its statement on Wednesday. The SIPMM compiles the index.

SIPMM vice-president for industry engagement and development Sophia Poh said: "Despite weaker supply-chain operations arising from last month's extended local circuit-breaker measures, the latest improved PMI readings indicate the resilience of the local manufacturing sectors. Going forward, manufacturers are cautiously optimistic of a gradual recovery towards the latter half of the year."

While the June figures may register further improvement as factories reopen, it may take more than a month for recovery into expansion territory, said OCBC Bank chief economist Selena Ling.

UOB economist Barnabas Gan said that "pharmaceutical production and exports may continue to support Singapore's overall manufacturing and trade environment", but noted that the risk of headwinds from renewed trade tensions between the United States and China could intensify in coming months.

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For overall manufacturing, the indices for inventory and finished goods both saw expansion, after three and two straight months of contraction respectively.

Slower contractions were recorded for imports, input prices and order backlog. Employment stayed in contraction for the fourth straight month, though it is improving.

For the electronics sector, inventory returned to expansion after three months of contraction. The indices for finished goods, imports, input prices and order backlog saw slower rates of contraction.

At readings of 49.2 and 49.7 respectively, the order backlog and finished-goods components "look like they have a good chance of returning to expansion territory in coming months", said Ms Ling.

However, supplier deliveries - both overall and in electronics - saw deeper contraction. This "may point to global supply-chain disruptions not fully resolving yet and could potentially weigh on the resumption of factories from June", she added.

Singapore's PMI performance is in line with global and regional readings in May, which largely showed improvement, said Ms Ling. But only China's official and Caixin manufacturing PMIs returned to expansion in May, suggesting that it "is likely the first-in-first-out of the Covid-19 crisis".

"On balance, the global manufacturing recovery is likely to remain muted in the near-term outside of China, but the worst may be over," she added.

While all remaining in contraction, IHS Markit manufacturing PMIs improved strongly for Malaysia, Myanmar, the Philippines, Vietnam and Thailand, and modestly for Indonesia, South Korea, and Taiwan.