Singapore’s PMI up a tad in March as region-wide factory activity improves

SINGAPORE’S manufacturing sentiment inched up in March, as region-wide factory activity continued making modest improvement.

The purchasing managers’ index (PMI) edged up to 50.7 during the month, posting slightly faster growth than February’s 50.6 reading, according to data from the Singapore Institute of Purchasing and Materials Management (SIPMM) released on Tuesday (Apr 2).

A PMI reading above 50 indicates growth from the previous month, and one below 50, a contraction.

March’s data marked the seventh straight month of expansion for the index, and is on par with January’s PMI reading of 50.7 – the highest reading since December 2021.

The linchpin electronics sector improved by 0.4 point, posting a faster expansion at 50.8 and staying in expansion territory for the fifth consecutive month.

SIPMM executive director Stephen Poh said that the manufacturing sector ended the first quarter with a brighter outlook, despite ongoing uncertainties resulting from geopolitical conflicts and an elevated interest rate environment in most major economies.

“Local electronics manufacturers are optimistic that robust growth in the global semiconductor industry will boost demand, and mitigate the economic headwinds,” he added.

The improvements in overall manufacturing and electronics PMIs suggest that February’s prints were “a temporary blip”, which could be attributed to the Chinese New Year festive season, said OCBC chief economist Selena Ling.

As she sees it, Singapore’s latest March readings “bode well for growth prospects for the second quarter of 2024, after a slightly shaky start early in the first quarter”.

Ling noted that key support was driven by electronics – especially semiconductors – on the back of an uptick in global demand. The recent rally in chip stocks also points to a boost in demand for artificial intelligence memory chips, which should be sustained in the coming months, she added.

The performance of the electronics sector will be key to Singapore’s manufacturing recovery in 2024, said DBS economist Chua Han Teng. He noted signs of improving demand in March, from faster expansion rates in new orders, new export orders and backlog orders.

“We expect Singapore’s electronics manufacturers to benefit from the turnaround in the global electronics cycle and demand, and will continue to watch for consecutive expansion in the subsequent months to ascertain a firmer upturn,” he added.

Most regional economies recorded improvements in March, though they largely remained in contraction mode.

One exception was China. Its official manufacturing PMI bounced back into expansion territory, climbing 1.7 points to 50.8 in March, surpassing market forecasts and ending its five-month contraction run.

The Caixin PMI, derived from smaller private manufacturers, hit a 13-month high. It gained 0.2 point to 51.1 during the month, marking its fifth straight month in expansion mode.

Also bucking the trend was Indonesia. The S&P Global Manufacturing PMI rose 1.5 points to 54.2, with output growth expanding at its fastest pace in 27 months.

In Taiwan, the S&P Global Manufacturing PMI rose 0.7 point to 49.3, though the contraction slowed down. South Korea’s S&P Global Manufacturing PMI returned to contraction territory, slipping 0.9 point to 49.8 in March.

Thailand’s manufacturing PMI rose 3.8 points to 49.1, though it remained in contraction territory. Still, this marked an eight-month high, and suggested that the country’s manufacturing sector was stabilising.

OCBC’s Ling said: “Singapore’s PMI improvements are aligned to the regional manufacturing PMIs picture, which also reinforce the expected modest improvement in the near-term outlook.”