Sentiment around Singapore’s manufacturing eased for the second consecutive month in September.
Data released by the Singapore Institute of Purchasing and Materials Management (SIPMM) showed a 0.1 point dip in the republic’s Purchasing Manager’s Index (PMI) to 50.8, from 50.9 in August.
This follows slower increase in new orders, new exports, factory output, inventory and employment.
"The overall manufacturing sector has ended the third quarter with slowing growth, albeit the electronics sector continues to record a faster growth,” observes Sophia Poh, vice-president for industry engagement and development at SIPMM.
See: Singapore's PMI hits 13-month high in July; economists anticipate slowdown as Delta variant rages in the region
Even as the PMI remains in the expansionary region, Selena Ling, chief economist at OCBC Bank notes that “momentum could have peaked and a slowdown is on the cards”.
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.
Meanwhile, the electronics PMI – a separate metric – picked up by 0.2 points to 51.2, making this its fourth consecutive month of growth.
Even so, the segment’s inventory, employment and finished goods indices edged up at a slower pace while its electronics supplier deliveries index shrank after eight months of expansion.
“Supply chain disruptions are still plaguing local manufacturers as they struggle to cope with reduced margins from the higher cost pressures," says Poh.
Agreeing, Ling says that the ability to sustain production in to the run-up to the Christmas season may be at stake as the inventory levels edge down for both domestic manufacturing and the electronics sector
“The ability to pass on some of the higher costs to the end-consumers would also be key,” she adds.
Her comment comes as the input price indices for both the overall manufacturing industry and the electronics sector rose by 0.3 points to 51.7 and 52.5 respectively.
The decline in the overall manufacturing PMI follows a “slightly softer external environment,” quips UOB economist Barnabas Gan. He adds that the numbers for Singapore is in sync with the slow down in export growth seen in the numbers across the region.
For instance, the Asean manufacturing PMI tracked by industry research firm IHS Markit came in neutral at 50.0 points in September. For comparison the metric came in at 44.5 in August.
Lewis Cooper, an economist at IHS Market noted that the data “signalled no change in manufacturing conditions in the month [for] the sector remains on an uneven footing”.
The manufacturing PMI came in contractionary in several Asean countries. For instance, Malaysia's PMI eased to 48.1 in September from 43.4 in the month before. Thailand's PMI edged up to 48.9 points, from 48.3 in August while Vietnam’s PMI reading stayed stagnant at 40.2 points.
Beyond Asean, the IHS Markit PMI was in positive territory in key electronics exporter markets. For instance, Taiwan's PMI slid to 54.7 points in September, from 58.5 in August, while the South Korean PMI rallied to 52.4 points, from 51.2 in the month before.
Mainland China's official manufacturing PMI fell to 49.6 points, from 50.1 in August. Conversely, the private Caixin PMI - which captures data on smaller and external-oriented manufacturers - improved to 50.0, from 49.2 the month before.
Looking at the data, OCBC’s Ling says “fears of supply chain disruptions and component shortages interrupting the manufacturing momentum within Asia appear to pose potential headwinds ahead for regional manufacturing centres, including Singapore, particularly given recent news headlines about China's ongoing power shortage and earlier Covid-related restrictions."
Cover image: file photo
