Singapore’s PMI edges up in July but remains contractionary for 5th straight month
Elysia Tan
SINGAPORE’S Purchasing Managers’ Index (PMI) reading inched up 0.1 point in July to 49.8, posting a slower contraction than June’s 49.7 reading, data from the Singapore Institute of Purchasing and Materials Management (SIPMM) showed on Wednesday (Aug 2).
A PMI reading below 50 indicates contraction from the previous month, while one above 50 means growth.
This latest data, which marks the fifth consecutive month of contraction, “reflected a stabilisation in factory sentiment”, said DBS economist Chua Han Teng.
The linchpin electronics sector improved by 0.3 point, posting a slower contraction at 49.3 and extending its contraction run to 12 months.
OCBC chief economist Selena Ling noted that July’s PMI readings aligned with the recent business expectations surveys, which showed slight improvements in both overall manufacturers’ and electronics firms’ outlooks.
SIPMM said that a slower contraction in the indices of new orders, new exports, factory output and employment but a faster contraction in inventory led to July’s improved PMI.
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Lowest level
Chua noted that inventory’s contraction was to the lowest level since around the start of Covid-19, amid destocking and soft demand.
“Yet, we think there is a limit of how low inventory can go, as destocking will eventually complete and demand conditions start to stabilise,” he added.
The improved electronics PMI was attributed to a slower contraction in the key indices of new orders, new exports, factory output, inventory and employment.
“Anecdotal evidence suggests that electronics manufacturers are somewhat sanguine about the prospects of a near-term recovery, driven by the chip industry,” said SIPMM executive director Stephen Poh. “There is a growing demand for enhanced integration capacity in generative artificial intelligence (AI).”
“However, the recent export ban on gallium and germanium by China could further disrupt the semiconductor supply chains,” he added.
While Ling believes that the electronics PMI may have bottomed, she also cautioned: “US-China strategic rivalry continues with a downside risk of tit-for-tat retaliatory measures.”
Chua and Ling agreed that Singapore’s improved readings in July are in line with other regional manufacturing PMIs.
Within Asean, July data was mixed. Headline PMI fell 0.2 point to signal the weakest improvement in its manufacturing sector’s health since December 2022.
Maryam Baluch, economist at S&P Global Market Intelligence, highlighted weaker expansions in output and total new orders, as well as a dimmer outlook due to “lingering global market uncertainty, China’s softening post-Covid recovery, and relatively subdued domestic demand”.
Struggled to secure new businesses
Still, at 50.8, overall Asean PMI remained above the neutral 50-point handle. Four of the seven constituent economies reported operating condition improvement.
Indonesia led the PMI rankings within Asean, with its 53.3 reading marking the fastest rate of expansion for the country in 10 months. Manufacturing growth was also recorded for the Philippines, Myanmar and Thailand in July.
Similar to Singapore, PMI in Vietnam and Malaysia – while in contractionary territory – indicated softer deteriorations in conditions.
Vietnam’s PMI rose to 48.7 in July from 46.2 in June. Manufacturers struggled to secure new business and thus cut output, but were still left with unsold stock, said Andrew Harker, economics director at S&P Global Market Intelligence.
But demand may be stabilising, with new orders falling at the softest pace in five months. “Firms will be hoping that this may feed through to renewed growth of orders in the months ahead,” he added.
PMI in South Korea rose to 49.4 for the month, from 47.8 in June. New orders observed the slowest reduction in a year, with businesses consequently increasing staffing and purchasing activity. Operating expenses fell for the first time since June 2020, noted Usamah Bhatti, economist at S&P Global Market Intelligence.
There were some exceptions to the generally improving picture.
Optimistic
Taiwan’s PMI dropped 0.7 point to 44.1 in July – the sharpest decline since November 2022, and among the steepest since the survey began in April 2004. Manufacturers anticipate further output cuts in the next months, as softer global demand conditions are projected to remain a drag on the export-led economy, said Annabel Fiddes, economics associate director at S&P Global Market Intelligence.
Japan’s PMI fell 0.2 point to 49.6 in July – but manufacturers were optimistic for the rest of the year.
China’s official manufacturing PMI improved to 49.3 in July, compared with 49 in June. But its Caixin PMI, derived from smaller private manufacturers, signalled a deterioration in business conditions, falling to 49.2 in July from 50.5 in June.
“The market has been lukewarm, with sluggish demand, and supply has shrunk in tandem,” said Wang Zhe, senior economist at Caixin Insight Group.
“The readings for total new orders and output were the lowest since December and January, respectively. Notably, new export orders fell sharply in July, as risks of an overseas recession mounted, and China’s external demand was clearly insufficient. The gauge for new export orders plumbed the lowest since September.”
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