SINGAPORE (ANN/THE STRAITS TIMES) – Singapore’s factory output is projected to see broader growth as it accelerates in the upcoming months, despite a minor decline in the electronics sector.
The purchasing managers’ index (PMI), a crucial gauge of manufacturing performance, increased to 50.7 in July from 50.4 in June, marking the 11th month of consecutive expansion, as reported by the Singapore Institute of Purchasing and Materials Management on August 2.
A PMI reading above 50 signals growth, while below 50 indicates contraction. The electronics PMI dropped slightly to 51 from 51.2 in June but still marked its ninth month of continuous growth.
Conversely, employment in the sector continued to shrink, albeit slightly improved, and supplier deliveries saw a decline following previous growth in June.
Economists interviewed by the source noted that the data suggests a more widespread recovery in manufacturing, which could support overall economic growth for the year. Dr Chua Hak Bin, senior economist at Maybank Research, commented: “The rise in the overall PMI indicates that the manufacturing recovery is gaining traction and remains robust, easing concerns after June’s industrial production downturn.
“This broader recovery might be extending beyond electronics, as indicated by the overall PMI’s performance. This may signal a turnaround in the biomedical sector after a significant drop earlier in the year.”
Selena Ling, chief economist at OCBC Bank, remarked: “The improved outlook, with a faster rise in the future business index, contrasts with the ongoing contraction in employment within the sector.
“This may suggest reduced prospects for manufacturing jobs in the second half of the year, consistent with previous business expectations data showing a stagnation in hiring plans for Q3.”
Another issue is the decrease in the supplier deliveries index. Dr Chua pointed out: “Persistent port congestion and shipment delays could continue to hinder recovery progress.”
Ms Ling agreed, noting this as the third consecutive month of contraction in supplier deliveries. She added: “While there is still momentum in the electronics sector, its recovery might be uneven rather than widespread.”
Dr Koh noted: “The drop in the output sub-index underscores ongoing difficulties in electronics production, with high global interest rates impacting investment and consumption.
“Inventory adjustments might also limit the recovery’s extent. Nonetheless, demand for electronics and semiconductors remains strong, driven by advances in generative artificial intelligence, which benefits the consumer segment.”
This trend is reflected in the continuing growth of electronics sub-indexes for new orders, new export orders, and future business.
Mr Koh also expects the sector to gain from ongoing monetary policy easing by central banks in advanced economies, along with positive effects from inventory restocking and the upgrading of obsolete machinery.
