Singapore PMI shrinks further in October, mirroring weak factory activity across region
Sharon See
SINGAPORE’S overall factory activity sank further in October, as global economic headwinds continued to hit manufacturing sentiment in the region.
The Purchasing Managers’ Index dipped a further 0.2 point to post a second straight month of contraction at 49.7 in October, data from the Singapore Institute of Purchasing and Materials Management (SIPMM) showed on Wednesday (Nov 2).
A reading below 50 on the index indicates contraction from the previous month; one above 50 means growth.
October’s reading was attributed to a faster contraction in the key indices of new orders, factory output and inventory, SIPMM said.
The electronics PMI slid 0.3 point to 49.1 as a result of a sharper contraction in the key indices of new orders, new exports, factory output, inventory and employment, SIPMM said.
Sophia Poh, vice-president of industry engagement and development at SIPMM, said uncertainties in the global trade environment, coupled with mounting cost pressures, are weighing on demand despite the year-end festive season, adding: “Local manufacturers, in particular the electronics sector, have been scaling back investment plans.”
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Both readings are the lowest since June 2020, although OCBC chief economist Selena Ling noted that they are not quite exactly near the lows – under 45 – in April that year.
Nonetheless, the data suggests a continued deterioration in momentum, outlook and confidence in the last quarter of the year, she said.
“This is a reinforcement of the recent business expectations survey for the manufacturing sector, which showed fairly bearish sentiments for the next six months, especially for the electronics industry,” said Ling.
“The headwinds include heightened recession risks in the major economies, continued inflation and, consequently, global monetary policy tightening, geopolitical tensions – including the US chip export ban on China – and cooling end-consumer demand for electronic products,” she said.
She added that she would not be surprised if the manufacturing sector contracted in Q4 and if both sets of PMI continued to slide for the remaining months of 2022, despite the upcoming year-end peak festive season.
Elsewhere in Asia, manufacturing sentiment in October continued to cool amid the weaker demand outlook.
China’s official PMI returned to contractionary territory at 49.2 after dropping 0.9 point. Its Caixin PMI, derived from smaller private manufacturers, rose 1.1 points to 49.2.
Commenting on the Caixin PMI, Wang Zhe, senior economist at Caixin Insight Group said that while supply, domestic and overseas demand as well as employment in the manufacturing sector all contracted, the rates of contraction slowed from those of the previous month.
“Overall, the negative impact of Covid controls on the economy lingered,” said Dr Wang. “Market sentiment improved, but optimism remained limited from a long-term perspective.”
In Taiwan, the S&P Global Manufacturing PMI fell 0.7 point to 41.5, marking a fifth month of deterioration in overall business conditions and the lowest reading since January 2009, during the global financial crisis.
Shreeya Patel, economist at S&P Global Market Intelligence, said: “Production levels were cut for the seventh month in a row, while firms grew increasingly pessimistic over their outlook for output, which was the second-weakest in the series history.”
She added that Taiwan’s economy is expected to feel the repercussions of the weak economic outlook for some time.
South Korea’s PMI rose 0.9 point to 48.2, an indication of further deterioration in the health of its manufacturing sector, said S&P Global, noting the weak demand conditions and ongoing supply issues.
Laura Denman, economist at S&P Global Market Intelligence, noted that overall business sentiment dipped to the lowest level since September 2020, amid concerns around the global economy, cost pressures and general uncertainty.
“Given the country’s open economy and its subsequent reliance on exports, the looming global downturn certainly poses a downside risk for future growth,” she said.
The S&P Global Asean Manufacturing PMI stayed in expansionary territory at 51.6 despite a 1.9-point fall, but this was the slowest improvement since October 2021.
“Softer upturns were noted for both output and new orders. While expansion in production levels remained resilient, factory orders grew sluggishly during October,” said Maryam Baluch, economist at S&P Global Market Intelligence.
“The slowdown also resonated in weak hiring activity and a softer expansion in purchasing levels, with firms noting rates of growth ticking down from the record speeds seen in the preceding month.”
She added that while there were signs that price pressures were continuing to ease, this is also partly linked to the slowdown in demand.
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