Singapore PMI hits 28-month high in April

SINGAPORE'S manufacturers remained optimistic in April, with the latest Purchasing Managers' Index (PMI) reading on Monday staying in expansionary territory for the 10th straight month.

April's PMI reading rose 0.1 to 50.9, the highest reading since December 2018, on the index compiled by the Singapore Institute of Purchasing and Materials Management (SIPMM). A reading of above 50 indicates expansion, and one below that, contraction.

The crucial electronics sector also saw an improved PMI reading of 50.7, up 0.1 point from the previous month, and marking its ninth month in expansion.

For both overall PMI and the electronics sector PMI, SIPMM attributed April's higher readings to faster expansion in the indexes of new orders, new exports, and employment.

In the overall index, these improvements more than made up for slower expansion of factory output and inventory, as well as greater contraction in supplier deliveries. In the electronics sector, slower expansion was registered for factory output, inventory, and supplier deliveries.

UOB economist Barnabas Gan, highlighting the support provided by the export sector, said: "Overall, the expansion continued to suggest that optimism is on the rise among Singapore's manufacturing cluster."

For both the overall and the electronics PMI, the indexes of imports, input prices, and order backlog also saw higher expansion. But the finished goods stock index dipped into contraction.

Mr Gan expects the labour market to improve further, given that the employment index has stayed in expansion for a second straight month. In addition, the higher order backlog "suggests that additional resources may be needed into the year ahead to fulfil outstanding orders", he said.

But SIPMM vice-president for industry engagement and development Sophia Poh noted that several manufacturers from the process industries are concerned about a labour crunch as a result of the recent entry ban on workers from India. Since April 23, non-resident arrivals from India have been restricted following a surge of Covid-19 cases in that country.

"Supply disruptions remain a major concern for manufacturers despite an upsurge in new orders," she added.

OCBC head of treasury research and strategy Selena Ling said the sustained increases, though marginal, were encouraging.

While the entry ban on workers from India may affect the marine and process industry and "may prove a near-term drag on any nascent recovery that was expected", policy-makers have indicated efforts to source for alternative labour supply and possible additional policy support, she said.

As long as the manufacturing growth driver of the electronics industry's semiconductors segment stays buoyant, "this should offset any downside risks posed by the labour-supply disruptions", she added.

Mr Gan said the risk to UOB's outlook appears to be balanced, with upside risks including a quicker-than-expected vaccine rollout, and downside risks revolving around pandemic uncertainties - with the rise of new variants - and geopolitical tensions.

Singapore's reading for April forms part of a generally strong regional picture. South Korea's manufacturing PMI edged down in April, but remained solidly in expansionary territory; Taiwan's climbed further to reach a more-than-decade high of 62.4, and Japan's reached a three-year high of 53.6.

The Caixin China general manufacturing PMI rose to 51.9, recovering from March's 11-month low of 50.6.

Closer to home, Indonesia and Malaysia also clocked record highs, with Malaysia's PMI rising out of March's contractionary territory to 53.9 in April.

One exception was the Philippines, where the PMI dipped back into contraction after a rise in Covid-19 cases led to factory closures.

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