Singapore factory activity edges into expansion in September as electronics sustains growth

[SINGAPORE] The Republic’s overall factory activity edged into expansion territory in September, holding steady amid a patchy regional manufacturing performance.

Singapore’s purchasing managers’ index (PMI) inched up 0.1 point to 50.1 in September, a slight increase from the month before. A reading above 50 indicates expansion.

Meanwhile, the electronics sector PMI gained 0.3 point to 50.7 in September, compared to a reading of 50.4 in the month prior.

While Singapore’s manufacturing PMIs have stabilised in recent months, following United States President Donald Trump’s “Liberation Day” tariffs, the readings are generally lower than the start of 2025, noted DBS senior economist Chua Han Teng.

“Singapore factories will have to contend with a still-volatile global economic landscape amid prospects of softer external demand stemming from high US tariffs globally and persistent uncertainty surrounding new rounds of sectoral tariffs,” he added.

Additionally, there is a widening gap between the headline and electronics PMIs, driven by temporary US tariff exemptions for electronics products and sustained artificial intelligence (AI) demand, said Chua.

The pharmaceutical cluster also now faces headwinds from the US’ 100 per cent tariff rate on branded drugs – though companies with US operations may secure exemptions.

Heading towards the traditional year-end production ramp-up, anticipated US Federal Reserve rate cuts may boost US consumption and global export orders, despite the reciprocal tariffs implemented since early August, said OCBC chief economist Selena Ling.

Generative AI optimism and data centre investment may continue driving advanced chip sales, she added, though potential sectoral tariffs on semiconductors pose risks.

Ling noted, however, that manufacturing orders could turn more sluggish heading into early 2026, especially if demand for consumer electronics and auto electronics falter.

Regional weakness

In September, regional peers posted mixed results, with several major economies remaining in contraction.

China’s official manufacturing PMI picked up 0.4 point to 49.8, marking a sixth consecutive month of contraction. However, the RatingDog China General Manufacturing PMI, a private index compiled by S&P Global, rose by 0.7 point to 51.2 – the highest since May.

September’s data suggests that China’s manufacturing activity is normalising following earlier supply and construction curbs, said Barclays analysts Zhang Ying, Zhou Yingke and Chang Jian in a report. But the gap between new orders and export orders, which gauges domestic demand, points to persistent consumption weakness.

Also in contraction mode was Japan, which fell 0.2 point to 48.5 in September, the weakest reading in six months. Meanwhile, Taiwan’s overall PMI stood at 48.3, the fourth consecutive month of contraction.

In contrast, Thailand, South Korea, Indonesia and Vietnam were all in expansion mode, with Thailand recording the strongest PMI reading.

Thailand’s manufacturing activity rose 1.9 points to 54.6 on a sharp rise in new orders spurred by faster production growth. This was the country’s fastest production expansion in nearly two-and-a-half years.

Forward-looking indicators suggest continued near-term growth, with rising business confidence, sharp increases in new orders and backlogs, said S&P Global Market Intelligence economics associate director Pan Jingyi.

At the same time, easing cost pressures allowed manufacturers to lower selling prices, a trend that may support future sales, she added.