Activity in Singapore factories expanded at a slightly faster pace in June, thanks to increases in new orders, new exports, inventory & factory output.

Factory activity grew for 10th straight month in June

by SIPMM News Team

Manufacturing activity in Singapore expanded for the 10th consecutive month in June, but economists warned that the pace may slow in the coming months as growth in the technology sector wanes.

The purchasing managers’ index (PMI) edged up by 0.1 point from May to 50.9 points in June, according to data released by the Singapore Institute of Purchasing and Materials Management (SIPMM) yesterday, above the 50-point mark that separates expansion and contraction.

The increase was attributed to improvements in new orders, new exports, inventory, and factory output. However, the reading was weighed down by further contraction in overall employment, where the sub-index fell 0.2 point to 49.5.

The SIPMM said: “The latest PMI readings indicated that growth in the local manufacturing sector remained unfettered, despite headwinds and uncertainties in the global market environment.”

However, economists said there are “signs of moderation” in the tech sector, pointing to a slower rate of expansion in electronics manufacturing activity for June. The PMI sub-index for electronics — which accounts for one-third of the Republic’s manufacturing performance — fell 0.3 point from May to 52.1 points. This was attributed to declines in new orders, new exports, factory output, inventory level and employment.

Mr Vishnu Varathan, head of economics & strategy at Mizuho Bank, said: “The decline in the electronics PMI was widely expected, as many had already felt that the growth was overdone. We expect electronics to remain buoyant but will have a moderation in growth for the rest of the year.” Last month’s electronics PMI reading of 52.4 was the highest since October 2014.

ANZ economist Ng Weiwen said: “The latest PMI indicator gels with our view that the tech cycle might have seen signs of maturing. Looking at manufacturing year-to-date, it has been propped up by electronics. Given that this main driver is fading, we expect industrial production and exports to taper off going into the second half of the year.”

Even as manufacturing is expected to grow at a slower pace, Mr Ng is not forecasting contractionary conditions. “The PMI would not accelerate and is likely to hover around 50 points for this year,” he said.

Manufacturing output in Singapore grew 7.4 per cent in the first five months of the year from the corresponding period a year ago, according to recent data from the Economic Development Board. The performance within clusters was, however, a mixed bag. Electronics, chemicals and precision engineering output grew from a year ago, while biomedical manufacturing, transport engineering and general manufacturing output fell.

Singapore’s PMI scorecard for June was broadly in line with regional PMIs. In China, the world’s factory hub, the private sector Caixin/Markit manufacturing PMI rose to 50.4 points from May’s 49.6 points. The official China PMI, which mostly covers larger state-owned manufacturers, accelerated to 51.7 points from May’s 51.2 points, boosted by industrial upgrading and improving sentiment.

Japan and Taiwan’s PMIs showed factory activity in the two economies expanding this month. Meanwhile, South Korea’s PMI rebounded into expansion territory for the first time in 11 months.

Source from TODAY

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