Singapore factory activity improves in Aug but major external headwinds remain

SINGAPORE (ICIS)–The country’s manufacturing purchasing managers’ index (PMI) rose marginally to 49.9 in August from 49.8 in July, marking the third consecutive month of improvement, according to data from the Singapore Institute of Purchasing and Materials Management.

However, the August SIPMM reading implies the sixth straight month of contraction in overall activity for the manufacturing sector, after a neutral print of 50.0 in February.

Prior to February, five straight months of contraction was observed.

The index for factory output turned expansionary (50.1 from 49.9) for the first time in August after four straight months of contraction while order backlog turned even more positive in August (50.3 from 50.2), implying improving demand prospects, according to Singapore-based UOB Global Economics & Markets Research.

“While we are heartened by the third consecutive month of marginal improvement in the headline PMI, the sub-50 print corroborates our view that Singapore still faces headwinds in the manufacturing sector as many key sub-indices of the PMI remain in contraction territory,” UOB said.

” Given the mixed picture, it is too early to call for a manufacturing recovery… The headline PMI could turn expansionary (above 50.0) in the next few months. We maintain our forecast for Singapore’s 2023 manufacturing to contract by 5.4%,” it said.

PRIVATE SECTOR PMI IMPROVES SHARPLY
Singapore’s private sector PMI, meanwhile, expanded solidly in August amid higher demand, financial information services provider S&P Global said in a report on Wednesday.

The S&P Global Singapore PMI rose to 53.6 in August, up from 51.3 in July, signalling a sixth consecutive monthly improvement in private sector conditions.

“August data revealed that incoming new orders rose at a markedly faster rate, underpinned by widening customer bases and with improvements in underlying demand conditions,” S&P Global said.

External conditions continued to worsen, however, with new business from abroad falling at the quickest pace since November 2020, it said.

“The one area of concern lies with exports with the seasonally adjusted new export orders index remaining well in contraction territory,” said Jingyi Pan, Economics Associate Director at S&P Global Market Intelligence.

“Sitting at a crossroads of the global economy, the data from Singapore further outlined the weakness in global trade over the latest survey period.”

Singapore’s external demand outlook for 2023 remains weak, with the downside risk factors and more persistent inflation inducing tighter global financial conditions.

Negative impacts on spending and the ongoing manufacturing downturn, escalations in the Russia-Ukraine conflict, and geopolitical tensions will lead to “renewed supply disruptions, dampen consumer and business confidence, as well as weigh on global trade”, according to the Ministry of Trade and Industry.

Singapore is a major petrochemicals manufacturer and exporter in southeast Asia. Its petrochemicals hub Jurong Island houses over 100 global chemical firms, including energy majors ExxonMobil and Shell.

Thumbnail photo: Pasir Panjang Container Terminal in Singapore (Photo by WALLACE WOON/EPA-EFE/Shutterstock)

Focus article by Nurluqman Suratman