Singapore PMI back in contraction mode in March, echoes region’s softer factory activity
SINGAPORE’S factory activity dipped a notch last month, mirroring a region-wide softening as uncertainty continues to cloud the near-term outlook.
The Purchasing Managers’ Index (PMI) fell a marginal 0.1 point to 49.9 in a swift return to contraction territory in March, data from the Singapore Institute of Purchasing and Materials Management (SIPMM) showed on Monday (Apr 3). A reading above 50 indicates expansion.
“The recent Western bank crisis has ratcheted up fears of a contagion and dampened demand in the global markets,” said Stephen Poh, executive director at SIPMM. “Nonetheless, Singapore manufacturers were hopeful that China’s reopening could have a positive impact on growth in the near term.”
OCBC chief economist Selena Ling noted that the drag was due mainly to softer new orders and the continued contraction in new export orders, while output was “treading precariously” at the 50 mark. The inventory and finished-goods stock indices rose slightly, she added.
Separately, electronics PMI inched up 0.1 to 49.4 point in March, continuing its eight-month run in contraction mode.
Ling noted that this was largely aided by modest improvements in the new orders and new export order gauges. There may also be a hint of “some mild stabilisation” for the industry outlook, given the small increases in the electronics imports and employment indices.
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Economists noted that input prices for both the manufacturing and electronics industry continued to ease, suggesting that inflationary pressures may be subsiding. However, UOB senior economist Alvin Liew said upside risks on price pressures remain, since oil prices may rise following Opec’s decision to cut production.
On the whole, economists said the latest readings have not changed their view of a manufacturing downturn in Singapore.
In China, manufacturing activity cooled across the board; its official PMI fell 0.7 point to 51.9 in March. The Caixin PMI, derived from smaller private manufacturers, returned to neutral at 50, down 1.6 points from February.
While the Chinese economy has entered a period of “fast recovery”, March presented signs of weakening in the rebound, as the foundation for economic recovery is “not yet solid”, said Wang Zhe, senior economist at Caixin Insight Group.
Barclays analysts said March data suggests that China’s reopening is “broadly more benefiting domestic demand rather than external demand”, since export orders remained weak.
“Against this backdrop, we continue to expect relatively weak exports, especially in North Asia, for several more months before they start picking up,” said the Barclays team.
In neighbouring South Korea, the S&P Global Manufacturing PMI reported sustained contraction, with a drop of 0.9 point to 47.6 in March, but the overall degree of optimism is at an eight-month high.
“Positively, South Korean manufacturers were buoyed by the softest deterioration in average vendor performance since November 2019, as the weakness in demand allowed suppliers to shore up their supply chains to ensure more timely delivery of inputs,” said Usamah Bhatti, economist at S&P Global Market Intelligence. Firms were also increasingly confident that the current situation would dissipate over the coming year.
The S&P Global Taiwan Manufacturing PMI was down 0.4 point to 48.6 in March, a pace of decline that S&P Global Market Intelligence economist Annabel Fiddes said is “considerably softer” than that in the second half of last year.
“Weakness continued to stem from subdued global economic conditions and a corresponding drop in client demand,” she said. “Until there is a meaningful improvement in customer spending at home and overseas, the sector is likely to remain under pressure in the months ahead.”
Closer to home, the S&P Global Asean Manufacturing PMI dropped 0.5 point to 51 in March, extending the current run of improving business conditions to 18 months.
Myanmar led growth for the first time in nearly three years, with a sharp improvement in manufacturing that propelled its PMI to a record 55.5. This was followed by Thailand, the Philippines and Indonesia.
The downturn in Malaysia, at 48.8, was the weakest since last September. Vietnam was the worst-performing country with PMI at 47.7.
“We see some concerns materialising, which could limit future growth. The slowdown in incoming new business and the renewed fall in employment, though only fractional, hints of a slightly muted demand environment and more cautious manufacturers,” said Maryam Baluch, economist at S&P Global Market Intelligence.
“Nonetheless, optimism across the region remained strongly upbeat, and with inflationary and supply chain pressures subsiding, this bodes well for the recovery of the sector,” she added.
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