Manufacturing sector remains weak, outlook cloudy
Bloomberg file photo
SINGAPORE — The manufacturing sector in Singapore started the year on a sluggish note as the weakness in December carried over into last month, with analysts seeing little light at the end of the tunnel amid an uneven global recovery.
The Purchasing Managers’ Index (PMI) inched up 0.3 point to 49.9 last month from 49.6 in December, but stayed below the 50-point mark that separates contraction and expansion, as new orders and inventory continued to contract, the Singapore Institute of Purchasing and Materials Management (SIPMM) said today (February 3).
December’s weakness was the worst performance in almost two years with a first-time contraction in new orders, and the January improvement was nowhere near enough to pull the manufacturing sector – which accounts for about a fifth of Singapore’s economy - out of the doldrums.
“Looking ahead, Singapore’s manufacturing sector may chalk up a fairly slow recovery, with first-half growth prospects looking tepid at this juncture,” said Ms Selena Ling, Head of Treasury Research & Strategy at OCBC Bank, who forecast growth in the sector to be flattish over the next three months.
Across the sub-indices, a modest rebound was reflected in all of January’s PMI except in input prices, which was partly due to the continued weakness in global oil prices, and employment, which fell to a four-month low.
“Although still in contraction mood, the overall PMI reading is a tad better in January after the sharp fall in December, with a modest rebound in all sub-indices except prices and employment. Nonetheless, it is a feeble recovery because the overall new orders index averaged just 49.7 over December last year to January this year as compared to 50.9 for the same period a year ago,” said Mr Song Seng Wun, Regional Economist at CIMB.
The uneven global recovery – with the Chinese economy slowing to a 24-year low and the euro zone barely ekeing out any growth even while the US rebounds strongly – is affecting sentiment among manufacturers in Asia.
“Here in Asia, while generally firmer results were recorded for January than at the end of last year, a handful of the countries are still reporting PMI readings of contraction, for example, Australia, Indonesia, and China. So there is no change to our current view of an uneven global demand recovery where the sharp decline oil prices will continue to impact on purchasing and inventory accumulation in some industries,” said Mr Song.
The electronics sector chalked up its 24th straight month of expansion, registering a PMI reading of 50.5 last month, unchanged from December, but economists warned of a difficult year ahead, after the electronics employment sub-index fell 0.9 points to 49.1.
“Outlook is still somewhat mixed going by the dip in the tech employment index at a third straight month of decline and in view of the sixth consecutive month of contractionary readings for backlog orders. It looks like Singapore’s tech manufacturers could be in for another choppy year,” Mr Song said.
