Singapore PMI contracts for first time in 2 years amid global slowdown
Tessa Oh
OVERALL factory activity in Singapore contracted for the first time in two years in September, echoing a region-wide drop in manufacturing sentiment amid cooling demand and persistent price pressures.
Singapore’s Purchasing Managers’ Index (PMI) slipped 0.1 point to 49.9 in September, shrinking for the first time after 26 straight months of expansion, the Singapore Institute of Purchasing and Materials Management (SIPMM) said on Monday (Oct 3). A reading above 50 indicates growth from the previous month; one below 50 means contraction.
Likewise, the lynchpin electronics sector dipped 0.2 point to 49.4 in September, contracting for the second straight month. It was weighed down by sharper contraction in the key indexes of new orders; new exports; and factory output, as well as a decline in the employment index after 22 months of continuous expansion.
“Global markets are still grappling with the macroeconomic risks of high inflation and qualitative tightening, as well as the geopolitical uncertainties of the continuing Russo-Ukrainian war,” said Sophia Poh, SPIMM’s industry engagement and development vice-president.
Nevertheless, the supplier delivery indices for both manufacturing and electronics improved in September as global demand cycles started to turn, while input indices have continued to ease, noted OCBC chief economist Selena Ling. “Growing global recession fears are likely to erode business and consumer confidence as major central banks continue to stay hawkish in the interim to burnish their inflation fighting credentials.”
The deflating global electronics momentum may continue to weigh on domestic manufacturing growth prospects in the coming months, despite the traditional run-up to peak Christmas order season, added Ling. As such, Singapore’s third-quarter growth estimates may moderate to 3.2 per cent year on year, compared to the 4.4 per cent seen in the second quarter.
BT in your inbox
Start and end each day with the latest news stories and analyses delivered straight to your inbox.
Singapore joins the ranks of other regional economies whose manufacturing PMIs are in the red.
The S&P Global Taiwan PMI tumbled 0.5 point to 42.2 in September, signalling a deterioration in overall business conditions for the fourth consecutive month. Similarly, the S&P Global Malaysia manufacturing PMI declined to 49.1 last month, from 50.3 previously.
China’s Caixin PMI, derived from smaller private manufacturers, tumbled to 48.1 in September, from 49.5 the previous month. But its official manufacturing PMI score inched up 0.7 point to 50.1, moving back into the expansion range after two months of contraction.
Despite being at odds, the two manufacturing PMIs send a consistent message of slow exports, said Barclays analysts Yingke Zhou and Jian Chang in a research note. For one thing, the improvement in the official PMI reading was largely due to the production index returning to expansionary territory, while new orders stayed in contraction territory, suggesting subdued domestic demand.
“We think weakening external demand amid a looming global recession suggests more headwinds for the manufacturing sector,” said the analysts. “Regional trade data also point to weakness in exports in September. The deterioration in export-related indicators is in line with reports suggesting exporters in manufacturing hubs are running out of orders.”
In contrast, countries in South-east Asia fared better, with Indonesia, Thailand and the Philippines all seeing PMI in expansionary territory.
But signs of slowing global growth loom, warned Annabel Fiddes, economics associate director at S&P Global Market Intelligence. “Tightening financial conditions and strong inflation rates worldwide could weigh on prospects in the coming months. Notably, the new export orders sub-index for the Asean manufacturing sector remained in negative territory during September.”
Copyright SPH Media. All rights reserved.
