Singapore’s PMI inches up to neutral reading after boost from China, but recovery still uncertain
Elysia Tan
SINGAPORE’S Purchasing Managers’ Index (PMI) reading inched up 0.2 in February to 50 after five straight months of contraction, data from the Singapore Institute of Purchasing and Materials Management (SIPMM) showed on Thursday (Mar 2). But economists warned that risks to recovery remain.
A PMI reading below 50 indicates contraction from the previous month, while one above 50 means growth. The linchpin electronics sector recorded slower contraction in February, up 0.2 point to 49.3 in the seventh consecutive month of contraction.
The improvements, led by China’s reopening and reduced recession risks in major economies such as the US and Europe, were expected, said OCBC chief economist Selena Ling. They are also “generally in line” with other regional PMIs, she added.
Sophia Poh, SIPMM’s industry engagement and development vice-president, said the readings are a “welcome respite” for Singapore manufacturers amid dampening global demand and worsening high inflation and interest rates. But “geopolitical risks remain unabated in the global markets”, she added.
Improvement in the new orders index, expansion in the factory output index, and slower contraction in the new exports index led to February’s improved PMI, said SIPMM. In electronics, a slower contraction in the above key indexes as well as inventory contributed to the latest print.
Meanwhile, in overall manufacturing, the employment index reverted to a contraction in February, the input prices index expanded more quickly, the imports index contracted more slowly and the finished goods index registered faster contraction.
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“Going forward, it would be key to see a further improvement in new export orders for this upward momentum to be sustainable,” said Ling.
New export order gauges for manufacturing and electronics remained in contraction, suggesting that “while things are gradually turning around, it may be too early to bring out the champagne”, she said.
“More importantly, the employment gauges for both manufacturing and electronics have turned further south, suggesting that business confidence has not yet returned strongly.
“Any turnaround in global electronics demand may only materialise in H2 2023,” said Ling, noting that demand may pick up alongside accelerating Chinese reopening, but US-China relations remain fragile.
Singapore’s improved PMI reading was part of the tentatively improving regional picture, with the exception of Japan and South Korea.
Japan’s manufacturing PMI reading dropped 1.2 points to 47.7 in February, the sharpest deterioration since September 2020. Output and new orders fell at the strongest rates for just over two-and-a-half years.
“The dip is likely to be sustained in the near term,” said Usamah Bhatti, economist at S&P Global Market Intelligence. “The absence of new orders amid dampened client confidence lifted capacity pressure on manufacturers further.”
Operating conditions remained subdued in South Korea, with PMI unchanged at 48.5 last month. Output and new orders fell further.
Taiwan posted a PMI reading of 49, contracting slightly – an improvement from January’s 44.3.
The higher readings, partly due to mainland China’s easing of Covid-19 restrictions, “add to hopes that the worst of the current downturn is now behind us”, said Annabel Fiddes, S&P Global Market Intelligence economics associate director.
But “the weak global economic climate and cost pressures at clients continued to weigh on output projections”, she noted, with expectations for the year remaining negative.
China’s Caixin PMI, derived from smaller private manufacturers, returned to growth in February amid the rollback in restrictions. Production volumes, registering the first upturn since August 2022, pushed PMI up to 51.6, from 49.2 in January.
Its official manufacturing PMI rose above the 50-point handle for the second straight month, up 2.5 points to 52.6.
The S&P Global Asean Manufacturing PMI rose again to 51.5 in February, up 0.5 point on the month.
Five of the seven Asean nations monitored by the survey registered manufacturing sector growth, up from January’s four. Thai manufacturers again marked the sharpest improvement, with manufacturing PMI at 54.8, the second-fastest pace on record.
Malaysia manufacturing was still the worst-performing, but its 48.4 reading in February was the softest contraction in four months.
In Asean, “the rate of expansion across the sector was the fastest in four months, as output grew at one of the fastest rates on record”, noted Maryam Baluch, economist at S&P Global Market Intelligence.
“However, sentiment continued to remain relatively subdued amid concerns over the broader global economic climate,” she said.
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