SINGAPORE’S overall manufacturing sentiment improved further in September, even as regionwide factory activity remained weak.
The purchasing managers’ index (PMI) improved slightly to 51 in September, a 0.1 point gain from the month before, data from the Singapore Institute of Purchasing and Materials Management (SIPMM) showed on Wednesday (Oct 2).
A reading above 50 on the index indicates growth from the previous month, and one below 50, a contraction.
The reading of 51 marked the 13th month of expansion for the overall manufacturing sector and is the highest reading since July 2021, boosted by a firm recovery in the linchpin electronics sector.
This sector also grew faster in September, gaining 0.2 point to 51.5 – the highest reading since August 2018.
SIPMM director Stephen Poh said: “The latest PMI readings indicate resilience in the manufacturing sectors, despite uncertainties in the major economies and continuing geopolitical risks of the global environment.”
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September’s improved PMI readings did not come as a surprise, given that the Republic’s factory output data for August had surprised on the upside, noted OCBC chief economist Selena Ling.
Looking ahead, electronics will remain the key driver of overall factory growth for the rest of the year, said DBS economist Chua Han Teng.
Electronics has, in fact, been on an expansion track for 11 straight months; its strong print for September reflects “resilient global demand for Singapore’s electronics products”, he noted.
“Singapore’s electronics firms would aim to sustain output activity in the coming months to fulfil rising new export orders, spurred by the replacement of smartphones and PCs, as well as the broadening adoption of artificial intelligence applications.”
UOB associate economist Jester Koh expects strong sequential momentum in electronics factory activity to be sustained for the rest of 2024, and into the first quarter of next year.
Further rate cuts by the central banks in advanced economies could also provide some counter-cyclical cushion to a slowdown in consumption and investment activity, he added.
But Ling warned of “dark clouds” ahead. Firstly, she said, input prices have risen further, even as supplier deliveries have fallen, suggesting that global supply-chain challenges are starting to bite.
“This could be linked to recent developments associated with widening Middle East tensions, potentially complicated by the US port strikes,” she said.
Secondly, she noted that the electronics order backlogs and further business indicators are starting to subside, though they remain at “relatively healthy expansion levels”.
“This suggests that the ramp up for the year-end Christmas order season may be coming to an end,” she said.
Lastly, the outcome of the US elections may affect trade tariffs for China and other economies, adding to near-term geopolitical uncertainties.
Regional weakness
In contrast, factory activity stayed soft in Asia, with regional exporters like Malaysia and Vietnam recording declines.
The S&P Global Asean Manufacturing PMI slipped a point to 50.5 in September, though it stayed in expansionary mode for the ninth straight month. The slowdown came largely from cooling demand, which was a dampener on output.
In South Korea, the S&P Global Manufacturing PMI declined 3.6 points to 48.3; in Taiwan, it fell 0.7 point to 50.8.
China’s manufacturing activity also continued to decline in September. The official manufacturing PMI improved 0.7 point to 49.8, but could not pull it out of contraction mode.
The Caixin PMI, derived from smaller private manufacturers, shed 1.1 points to 49.3 – the fastest fall since July 2023.
Barclays analysts Ying Zhang, Jian Chang and Yingke Zhou said: “While China recently intensified its support measures following a slew of weak third-quarter data prints, we think (September’s) PMI data again underscores the need for more policy stimulus to arrest the economic downturn and repair household, corporate and local-government balance sheets, to rebuild their capacity and willingness to borrow, spend and invest.”
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