Factory activity shrinks for fifth straight month
A manufacturing and logistics facility in Singapore. TODAY file photo
SINGAPORE — Manufacturing activity in Singapore shrank for a fifth consecutive month in November, as the seasonal year-end pickup in Christmas orders failed to improve the numbers due to high warehouse inventory.
The Purchasing Managers’ Index (PMI) improved 0.3 points from the previous month to 49.2 points, but stayed below the 50-point mark that separates expansion from contraction due to further declines in new orders and new export orders, the Singapore Institute of Purchasing and Materials Management said today (Dec 2). Production output and inventory recorded an improvement in readings, but continued to stay in contractionary mode.
“I think this (the figures) is the best we can hope for. The pickup was due to increased orders from the United States ahead of Christmas sales,” said Barclays economist Leong Wai Ho.
However, as inventories are still high, manufacturers are still clearing out their stocks and not making much in the way of new orders.
“There is still a lot of inventory in the system across Asia, (and) the orders are not translating into new production or into higher levels of purchasing activity. So until inventory is cleared sufficiently, we do not see much hope that PMIs will return to expansion in December,” added Mr Leong.
The electronics PMI sub-index rose 0.4 points to 49 points, but remained in contraction due to declines in new orders. “What we are hearing from the tech companies is that there has been a cutback in orders for electronics; we expect (the) trend to remain in contraction mode,” said Credit Suisse economist Michael Wan.
The weak Singapore figure is in line with soft regional PMI readings, with factory activity in China, Taiwan, South Korea, Malaysia and Indonesia in contractionary mode last month.
Factory activity is likely to continue to be in contractionary mode until March. “PMI for November is still in contractionary territory and not the prettiest picture. Our lead indicators suggest that the outlook for the manufacturing sector will likely stay subdued until the first quarter of next year, with a gradual pickup as we go into the second quarter,” said Mr Wan.
