Singapore PMI dips slightly amid strong regional factory activity

SINGAPORE’S overall factory activity grew more slowly in June, even as business conditions in the region appeared to be more favourable.

The Purchasing Managers’ Index (PMI) dipped a marginal 0.2 point to 50.4, its lowest point this year, even if June marks the 10th straight month of expansion, data from the Singapore Institute of Purchasing and Materials Management (SIPMM) showed on Tuesday (Jul 2).

A reading above 50 indicates expansion.

Electronics PMI meanwhile continued its climb, edging up 0.1 point to 51.2 and remaining in expansion for eight consecutive months.

OCBC chief economist Selena Ling coined this divergence the “story of two halves”, adding that it could be due to the worst port congestion Singapore is facing since the Covid-19 pandemic.

At the same time, some segments within manufacturing, such as pharmaceuticals, could also be “feeling the heat” given the recent lacklustre output data, she said.

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UOB associate economist Jester Koh said that supplier delivery times have likely risen as vessels were diverted away from the Red Sea to avoid the ongoing conflicts. This rerouting around the Cape of Good Hope led to an increase in nautical miles and longer sailing times, as corroborated by the decline in the supplier deliveries sub-index for both sets of PMI.

Still, DBS economist Chua Han Teng believes the electronics cluster will lead the manufacturing recovery this year, and that improvement of the electronics PMI “should negate concerns regarding the modest pullback” of overall factory activity.

Koh also remains optimistic about the electronics recovery, citing supportive base effects in the second and third quarters, while end-demand fundamentals remain intact.

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In China, official PMI stayed unchanged at 49.5 in June, remaining in contraction for the second straight month. However, the Caixin PMI, derived from smaller private manufacturers, inched up to 51.8, marking eight months of improvement. This is also the fastest rate of growth since May 2021.

However, Wang Zhe, senior economist at Caixin Insight Group, said that while recent macroeconomic data points to an economic recovery, insufficient market confidence and effective demand remain key challenges.

Meanwhile, South Korea and Taiwan recorded their fastest growth in factory activity in over two years.

South Korea’s PMI, published by S&P Global, rose 0.4 point to 52 in June, its highest level since April 2022. “Viewed as a bellwether for exports due to its integration in supply chains for key intermediate goods like batteries and semiconductors, South Korean manufacturing output and orders often provide leading signals for trends more broadly,” said Joe Hayes, principal economist at S&P Global Market Intelligence.

Taiwan’s PMI, also by S&P Global, climbed 2.3 points to hit 53.2 last month, the best reading since March 2022.

In particular, Taiwan’s manufacturing sector benefited from an upswing in domestic and international demand in June, said Paul Smith, economics director at S&P Global Market Intelligence. However, he warned that June’s survey also revealed intensifying inflationary pressures, with input expenses rising markedly and to the greatest degree in two years.

Closer to home, the S&P Global Asean PMI stayed unchanged at 51.7 in June, marking six months of expansion.