Factory activity shrinks for eighth straight month
A man looks at a cluster of factories at an industrial park in Singapore in this September 16, 2014 file photo. Photo: Reuters
SINGAPORE — The Republic’s manufacturing sector extended its stretch of deteriorating conditions for the eighth consecutive month in February, the lowest reading since December 2012, due to lower new orders, a further drop in output and lower employment. Economists do not expect a recovery in the manufacturing sector at least until after the first half of this year.
February’s Purchasing Managers’ Index (PMI) weakened 0.5 point from the previous month to 48.5 points, staying below the 50-point mark that separates expansion from contraction, the Singapore Institute of Purchasing and Materials Management (SIPMM) said on Wednesday (March 2).
New export orders contracted for the 13th consecutive month, whereas stocks of finished goods continued to accumulate since April last year, SIPMM said. Inventory recorded expansion for the third consecutive month with a faster rate of supplier deliveries, while the employment index fell further to 48.2 points from 48.6 points in January.
The electronics sub-index posted another contraction at 48.2 points, from 48.5 points the previous month, down for the eighth straight month, due to a further decline in new orders and factory output.
Ms Selena Ling, OCBC Bank’s head of treasury research and strategy, said: “External economic conditions remain very very weak. Generally the data is worse-than-expected. The reading confirms expectations that first quarter is going to be pretty weak for manufacturing. There is a deterioration across most of the segments. With inventory going up, it shows that there is not much take up on the demand side.”
The weak data is in line with PMIs in the region. Last month, PMIs for Malaysia, Indonesia, Taiwan as well as China — Singapore’s top export country — were in contractionary mode.
The official Chinese PMI, which covers larger state-owned manufacturers, shrank for the seventh consecutive month to 49.0 points, while the Caixin/Markit index for smaller, private firms contracted for the 12th straight month to 48.0.
“The data last month shows the continuation of the bleak picture, not just us but for our region. The recent PMI data for China, Taiwan, Malaysia and Indonesia show ongoing contractions,” said UOB economist Francis Tan.
“We expect manufacturing to remain in contractionary mode until the first half of this year, with a positive recovery boosted from stronger consumption from the United States and the European Union,” Mr Tan added.
Mr Tan forecasts the manufacturing sector will grow by 2.5 per cent year-on-year in 2016, on the back of a low base effect from last year. For the first quarter, Mr Tan expects the sector to grow by 0.9 per cent year-on-year.
