Singapore PMI still rising, but factory growth momentum expected to ease in 2021

Singapore

SINGAPORE'S factory sector continued its growth in December, as sentiment picked up on the month before, a survey on Monday showed.

The Purchasing Managers' Index (PMI) rose to 50.5 points, up by 0.1 point from November, according to the Singapore Institute of Purchasing and Materials Management (SIPMM).

The uptick in overall PMI, which marked manufacturing's sixth straight month of expansion, was attributed to faster pick-up in new orders, factory output and inventory.

Readings above 50 points indicate expansion, while those below 50 point to contraction.

Meanwhile, the PMI for Singapore's linchpin electronics cluster grew for the fifth straight month, adding 0.1 point to 51.2 points - its highest level since September 2018.

DBS senior economist Irvin Seah called the higher scores in new orders and new export orders encouraging and said that they "affirmed the notion of this global recovery".

Month-on-month dips in inventory and stock of finished goods could also spur production in the next one to two months as manufacturers build up supply, he said.

Still, overall employment and electronics supplier deliveries both shrank for the 11th straight month - the only two sub-PMIs in the red.

The institute also noted that new exports grew more slowly, which could mean that "the higher expansion rate in new orders is fuelled by domestic consumption".

Chua Hak Bin, senior economist at Maybank Kim Eng, told The Business Times: "Some of the lower-end electronics manufacturing may be impacted by foreign labour shortages...

"United States sanctions on Huawei may also be disrupting the supply deliveries and exports of semiconductors to the China market."

He expects manufacturing growth to ease 3.2 per cent in 2021, from an estimated 7.1 per cent in 2020.

OCBC chief economist Selena Ling, who pointed to the outsized economic role of manufacturing in 2020, said that "hopefully electronics, pharmaceuticals and precision engineering can sustain into 2021".

But she also noted that manufacturing momentum in China could be peaking, and the trend "may be mirrored in other Asian manufacturing PMI in the coming months too".

That's as sentiment gauges for the manufacturing sector were mixed in the rest of the region. China's official manufacturing PMI cooled to 51.9 in December from 52.1 in November, while the private-sector Caixin PMI eased to 53.0, from 54.9 before.

Yet IHS Markit data saw Vietnam's PMI rise to 51.7, from 49.9 in November, while Taiwan extended its gains in a jump to 59.4, from 56.9. The South Korea manufacturing PMI was flat month on month at 52.9 points.

Overall, Barclays analysts wrote that manufacturers in emerging Asia are seeing "some seasonal moderation in new export orders PMIs, but (the) recovery trend remains intact".

"Still-firm regional manufacturing PMIs support our view of continued recovery in manufacturing in EM Asia into 2021 aided by solid China demand," they said in a report.