SINGAPORE – Manufacturing activity in Singapore expanded for the ninth consecutive month in May as it resumed a small, upward trajectory after stuttering somewhat in April amid weaker global growth.
The Purchasing Managers’ index (PMI), a barometer of the manufacturing sector, rose to 50.6 points in May, up from April’s 50.5 points, according to the latest data released by the Singapore Institute of Purchasing and Materials Management on June 3.
Meanwhile, the PMI for electronics, a key subsector of manufacturing, rose to 51.1 points, up from 50.9 points in the month before.
Readings above 50 points denote growth, whereas those below 50 indicate contraction.
The overall expansion in manufacturing was boosted by improvements in many segments, including new export orders, output, and new orders.
Meanwhile, stocks of finished goods and employment experienced slower growth.
Input prices, deliveries
In contrast, input prices for manufacturing and supplier deliveries for the electronics sector slipped into contraction. Input price refers to the cost of raw materials and services needed to manufacture a good.
Input prices for the electronics sector and supplier deliveries for overall manufacturing expanded at a slower pace.
Economists told The Straits Times that the PMI data continues to paint a positive outlook for the second half of the year.
Maybank economist Chua Hak Bin and UOB associate economist Jester Koh both felt that the manufacturing recovery remains intact, despite the recent weak readings for industrial production and exports, as well as the tepid electronics output in April.
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OCBC Bank chief economist Selena Ling noted that the trajectory of the domestic PMI aligned with the expansion across the rest of the region, which included the positive readings in the China Caixin PMI, as well as in Indonesia, South Korea, the Philippines, Taiwan, and Vietnam.
On the easing of input prices, she said: “This first contraction could suggest a further resolution of existing supply-chain challenges.”
Meanwhile, she attributed the slump in the supplier delivery gauge for electronics – following two months of expansion – to “heightened geopolitical tensions”.
These include attempts by the US to curb artificial intelligence (AI) chip exports to the Middle East on fears that they may be diverted to China, as well as the recent Chinese military exercises in the Taiwan Strait.
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Ultimately, these factors could potentially stifle the sprouting of green shoots in the electronics sector in the near term, Ling said.
Koh suggested that the recent weakness in electronics production could also reflect “some degree of temporary inventory digestion, as affirmed by the moderation in the stocks of finished goods”.
Looking ahead, he anticipated an easing of financial conditions towards the latter half of the year, “as central banks in advanced economies start to reduce policy rates, which could provide some tailwinds for global investment and consumption activity”.
Chua agreed, noting that the acceleration in the electronics PMI “signaled that the recovery in global demand is strengthening and broadening, particularly to other segments, including consumer electronics and computer peripherals”.
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“Singapore’s semiconductor ecosystem – less exposed to the global AI boom than North-East Asian economies – has been weighed down by the softening demand for automotive and industrial chips,” he said.
Chua also attributed the contraction in supplier deliveries to disruptions because of the Red Sea re-routing and port congestion, which could dampen the manufacturing recovery. “Export orders cannot be fulfilled if supplies of key components cannot be secured or face long delays.”
Koh said: “Supplier delivery times have likely risen as vessels were diverted around the Cape of Good Hope, away from the Red Sea, to avoid the ongoing conflicts.”
In turn, the disruption in vessel arrival schedules at major ports around the world, coupled with off-schedule arrivals, has led to a “bunching effect”, he added.