Sentiment around Singapore’s manufacturing sector came in flat in October, after two consecutive months of easing.
Data released by the Singapore Institute of Purchasing and Materials Management (SIPMM) showed that the republic’s Purchasing Manager’s Index (PMI) came in at 50.8, unchanged from the reading in the month before.
October marks the 16th month of expansion in the metric.
The latest reading follows slower growth in the key indices of new orders, new exports and factory output. However, this was offset by the indices of inventory, employment and supplier deliveries, SIPMM noted.
Meanwhile, the electronics PMI – a separate metric – dipped by 0.1 points to 51.1, after four consecutive months of growth.
See: Singapore's PMI slows for second consecutive month; economists brace for further slowdown amid supply chain disruptions
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The PMI is a key barometer indicating a nation’s manufacturing activity. A number above 50 indicates an expansion in output, while that below 50 points to an industry shrinkage.
Selena Ling, chief economist of OCBC notes that the input prices for the overall manufacturing sector, as well as for the electronics sector, are now at multi-year highs.
"Whether the input price increase arises from higher shipping costs and/or supply chain disruptions which have contributed to component shortages, it would still pressure profit margins if not passed on to consumers eventually," she says.
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However, she notes that the softer outlook for new orders and new exports suggests that the external demand for both the manufacturing and electronics sectors may have peaked and are likely to subside after the Christmas rush.
Ling’s expectation is that manufacturing momentum could ease in 1Q2022.
Irvin Seah, a senior economist at DBS Bank quips that there are some “emerging signs” that the manufacturing sector could be under the weather. His “biggest worry” is a slowdown in China, which makes up Singapore’s largest export market.
“The overarching China slowdown story still dominates, and it could potentially have some implications for Singapore's manufacturing sector," he points out.
Seah adds that the superpower’s slowdown could also affect the electronics sector, even as it may be well supported by resilient global demand.
“Having said that, my concern is that typically by October, we should see some spike up because of the festive-season demand but instead, it actually dipped. So this is something that we need to keep a close watch on," he noted.
Manufacturing sentiment across the Asean region has been seemingly disparate.
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For instance, the IHS Markit Asean PMI reading rose to an all-time high of 53.6, on the back of an easing of Covid-19 measures.
Lewis Cooper, an economist at IHS Markit notes that “growth was broad-based” across all the constituent nations, except Mynamar.
“Indonesia topped the growth rankings with a survey record PMI reading, followed by Singapore, Malaysia and Vietnam, with the latter two registering the first improvement in the health of their respective goods producing sectors since May. The Philippines and Thailand also recorded improved operating conditions in October,” he explains.
Elsewhere in Asia, China’s official manufacturing PMI slid to 49.2, extending the slowdown that began in April.
However, the Caixin PMI – which is captures data from smaller, private manufacturers – edged up by 0.6 points to 50.6.
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Meanwhile, South Korea’s PMI fell to 50.2 in October, down from the previous month’s 52.4 reading. Economists at IHS Markit say that sentiment there is the weakest it has been since September 2020.
"The latest data provided the first indication that sustained supply chain disruption had directly impacted activity. The impact of shortages has also been clear in rising raw material prices, with inflation accelerating to the quickest for three months," observes Usamah Bhatti, an economist at IHS Markit.
Conversely, Taiwan’s IHS Markit edged up 0.5 points to 55.2 in October. Even as client demand picked up, manufacturers there were seemingly struggling to meet the upturn in orders no thanks to shortages and supplier delays, an IHS Markit economist notes.
Cover image: file photo
