Factory activity grew for 13th straight month
Manufacturing activity recorded its 13th consecutive month of expansion for September and is at the highest level since April 2011, as the technology sector continued to provide support. Reuters file photo
SINGAPORE — Manufacturing activity recorded its 13th consecutive month of expansion for September and is at the highest level since April 2011, as the technology sector continued to provide support.
The Purchasing Managers’ Index (PMI) reached 52 points last month, above the 50-point mark which separates contraction and expansion. The data was released by the Singapore Institute of Purchasing & Materials Management on Monday (Oct 2).
The PMi for the electronics sector, which has been supporting manufacturing, recorded a 14th month of consecutive expansion, up 0.4 point from the previous month to 53.6 points. This is attributed to a faster rate of expansion in most of the key indicators of the sector.
The latest reading for manufacturing can be attributed to a faster rate of expansion in most indicators such as new orders, new exports, output, inventory, employment and backlog orders.
Economists offered a mixed view going forward into the fourth quarter, with some expecting the sector to cool, while others said that the support seen in factory backlog orders show that an expansion is likely to continue into the fourth quarter.
CIMB Private Bank economist Song Seng Wun said: “Output, employment, orders, continue to be supportive to manufacturing, providing a lift. There are still orders pulling through; backlog orders are still supportive of continuing expansion, and hence shows support into fourth quarter’s manufacturing activities.”
Ms Selena Ling, head of treasury research and strategy at OCBC Bank, said that domestic manufacturing growth has likely peaked in the third quarter, and should decelerate into the fourth quarter.
The electronics industry may have hit its peak and could be taking a breather soon, as the order backlog and finished goods indices slowed from a month ago, Ms Ling noted. The deliveries index went into contractionary mode after seven straight months of expansion, she said.
However, with the manufacturing outperformance seen in July and August, third-quarter Gross Domestic Product growth could hit as high as 5.3 per cent year-on-year, thereby lifting full-year growth to above 3 per cent year-on-year, Ms Ling said.
On a macro level, the September picture for global and regional manufacturing PMIs is generally healthy, albeit a little mixed, she added. Those for Japan and the Philippines expanded higher from the previous month, while that for Indonesia eased from the previous month, maintaining an expansionary mode. The PMI for Malaysia slipped back into contraction territory.
The world’s manufacturing hub, the official China PMI, which mostly covers larger state-owned manufacturers, continued on expansionary mode at 52.4 points, growing at the fastest pace in over five years.
Its private sector Caixin/Markit manufacturing PMI continued to stay in expansionary mode though it eased slightly to 51 points last month, down from 51.6 points the month before.
