Singapore's manufacturing growth slows further in October

SINGAPORE'S manufacturing growth slowed for the second straight month in October, with electronics activity reaching a two-year low. The latest Purchasing Managers' Index (PMI), a leading indicator of economic activity, was down 0.5 point to 51.9 - the lowest level since August 2017 and below economists' expectations of 52.2. Still, the sector continued to grow for the 26th consecutive month, with a reading of 50 or more on the survey-based index indicating expansion.

The Singapore Institute of Purchasing and Materials Management (SIPMM), which compiles the data, attributed the lower overall reading to slower growth in new orders, new exports, factory output, inventory and employment level. In particular, the factory output index of 52.6 was the lowest since July 2017, while the imports index of 51.1 was the lowest since February 2017.

Finished goods and input prices also saw slower rates of expansion, while the order backlog index moved back into contractionary territory, having fluctuated around a reading of 50 since June this year.

Although in its 27th consecutive month of expansion, the electronics sector PMI declined 0.9 point to 50.5, down from 51.4 in September and marking the lowest reading since November 2016. This was due to slower expansion in new orders, new exports, factory output, inventory and employment. Also seeing slower expansion were finished goods, imports, and input prices, while the supplier deliveries index saw faster expansion. The electronics order backlog index remained in contraction for the sixth straight month.

OCBC head of treasury research and strategy Selena Ling saw the softening in both overall and electronics PMIs as a sign that trade tensions between the United States and China have begun to bite. Singapore's manufacturing growth for the fourth quarter of 2018 "is likely to be poised on a relatively lacklustre footing, and barring a de-escalation of the US-China trade war, may soften further into Q1 2019", she said.

Coming a day after Nikkei PMI releases for other Asian markets, Singapore's figures complete a largely weak regional picture. Although Vietnam's PMI picked up, Indonesia and South Korea saw slowing expansion. Myanmar's PMI stayed in contraction for the fourth month, while Taiwan, Malaysia and Thailand slipped into contractionary territory.

Said Ms Ling: "This data set clearly delineates the potential winners-losers from the US-China trade war."