SINGAPORE – Factory activity in Singapore posted a 23rd month of consecutive expansion in May, but the electronic sector’s growth lost some of its vigour.
The Purchasing Managers’ Index (PMI), a key barometer of the Republic’s manufacturing economy, came in at 50.4 points, up 0.1 point from April, said the Singapore Institute of Purchasing and Materials Management (SIPMM) on Thursday (June 2).
A reading above 50 indicates growth, while one below 50 signals contraction.
SIPMM said the latest reading for manufacturing was attributed to faster expansion rate in new orders, input prices and order backlog. However, slower expansion rates were recorded in the key indexes of output and employment, while the inventory index contracted at a faster contraction rate and supplier deliveries reverted to a contraction after 12 months of expansion.
The electronics PMI grew for a 22nd month, but posted a decrease of 0.2 point from the previous month to record a slower pace of expansion at 50.5.
Ms Sophia Poh, SIPMM vice-president for industry engagement and development, said the data shows that growth in the electronics industry appeared to be moderating.
“This could be a result of the prolonged uncertainties arising from the Russia-Ukraine conflict and rising supply costs. Global demand had also weakened due to the massive lockdowns in China and slowing growth in the European Union,” she noted.
Analysts said Singapore’s overall PMI is in line with regional manufacturing PMIs that also reflected a mixed performance in May. Global electronics demand is also beginning to soften amid worries of a growth moderation, and even possibly recession in major economies like the United States, they said.
Vietnam’s PMI rose to 54.7 in May from 51.7 a month earlier, while it was unchanged for Thailand at 51.9. But PMI readings showed signs of weakness in Taiwan to Malaysia, the Philippines and India.
China’s official and Caixin manufacturing PMIs both improved slightly in May but remained in contraction territory, below 50.
Ms Selena Ling, chief economist and head of treasury research and strategy at OCBC Bank, said the gains in input prices and order backlogs suggest that global supply chain disruptions were taking a heavier toll.
“Prolonged uncertainties over the Russia-Ukraine conflict, aggressive monetary policy tightening, moderating growth momentum and, hence, demand conditions especially in Europe and China are likely to continue to weigh on consumer confidence and business outlook in (the) coming months,” she said.
“This does not bode well for the electronics growth momentum in the coming months if the supply gaps, including the global semiconductor chip shortage, do not ease significantly in the second half of 2022,” Ms Ling added.
Still, she added, with China gradually lifting its Covid-19-related lockdowns, including in Shanghai, the risks of unpredictable and sudden production shortages may be fading.
The slowdown in PMI reading for electronics was attributed to slower expansion rates in the key indexes of new orders, new exports, and employment, said SIPMM.
The factory output index reverted to a contraction, while slightly faster contraction rates were recorded for the indexes of inventory, finished goods and supplier deliveries.
The indexes of input prices and order backlog recorded faster expansion rates, whereas the import index posted a slower expansion rate. The order backlog has now expanded for 23 consecutive months, SIPMM said.
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MCI (P) 031/10/2021, MCI (P) 032/10/2021. Published by SPH Media Limited, Co. Regn. No. 202120748H. Copyright © 2021 SPH Media Limited. All rights reserved.