Manufacturing sentiment in Singapore for July, was the strongest it has been in nearly three years.
Data released by the Singapore Institute of Purchasing and Materials Management (SIPMM) showed a 0.2 point increase in the republic’s Purchasing Managers’ Index (PMI) to 51.0.
The PMI index is a key barometer indicating a nation’s manufacturing activity. A reading above 50 indicates an expansion in output, while that below 50 points to an industry shrinkage.
SIPMM attributes the latest showing to faster expansions in new orders, new exports, factory output, inventory and employment.
However, the finished goods index continued its decline for the fourth consecutive month.
Meanwhile, the electronics PMI – a separate metric – edged up by 0.2 points to 50.8 in July.
This follows faster expansion rates for new orders, new exports, factory output, inventory and employment, says SIPMM.
Conversely, supplier deliveries grew at a slower pace in July as the overall reading edged down to 50.1 point, from 50.2 in June. The reading for electronics deliveries similarly slipped to 50.8 from 50.9 previously.
Meanwhile Selena Ling, OCBC Bank's head of treasury research and strategy, points out that input prices had edged up higher in July to 51.3 overall, from 51.1. The reading for electronic hit 52.0, from 51.8.
The rise "may be a cause of concern given news of the ongoing global chip shortage and rising commodity prices, especially if manufacturers are unable to pass on the higher costs to end-consumers", she said.
Ling’s counterpart from UOB, Barnabas Gan adds that this may also be a sign that imported inflation will likely persist in the immediate horizon.
Still, he sees “little negative impact in Singapore’s manufacturing landscape”.
For comparison, major Asian economies saw month-on-month declines in their positive PMI readings.
China's official manufacturing PMI fell from 50.9 to 50.4, while the private Caixin PMI - which focuses on smaller and external-oriented manufacturers - eased from 51.3 to 50.3
Meanwhile, IHS Markit reports that "the Asean manufacturing sector saw a sharp deterioration in conditions during July". The regional PMI reading tumbled to a 13-monthly low of 44.6 in July, from 49.0 in June.
The performance of Singapore’s overall and electronic PMI indicates that its manufacturing sector continued to expand, in spite of the Phase 2 (Heightened Alert) measures, observes Sophia Poh, vice president for industry engagement and development at SIPMM.
"Anecdotal evidence suggests that the supply shortages faced by electronics manufacturers appear to be easing, although local manufacturers remain concerned about the fluidity of economic restriction due to the evolving variants of Covid-19," she noted.
OCBC’s Ling quips that the data suggests that the Delta variant spread continues to exert an uneven toll across the Asian economies, depending on their vaccination progress and respective stages of economic reopening.
"At this juncture, Singapore's manufacturing and electronics sectors remain fairly resilient and should continue to provide a key pillar of support for near-term growth," she says.
Going forward, she expects domestic manufacturing moderate to single-digit growth rates in the second half of this year, as the low base effect from last year subsides.
For the full year, she has pencilled a growth rate of 10% for the manufacturing sector.
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