PMI grows slightly but still staying in negative territory, Latest Business News - The New Paper

PMI grows slightly but still staying in negative territory

This article is more than 12 months old

There was a slight uptick in manufacturing sentiment last month but the sector remained in negative territory for the fourth consecutive month on the back of escalating trade tensions.

The Purchasing Managers' Index (PMI) - an early gauge of factory activity - grew 0.1 point from July to a reading of 49.9. A reading above 50 indicates expansion; one that is below points to contraction.

August's modest rise was due to a marginal expansion of new orders and a slower contraction in inventory, noted the Singapore Institute of Purchasing and Materials Management (SIPMM), which compiles the index.

"Despite ongoing global trade uncertainties, anecdotal evidences of the survey suggest foreign manufacturers are exploring opportunities to collaborate with local manufacturers to overcome the high tariffs imposed on their countries," said SIPMM vice-president for industry engagement and development Sophia Poh.

Maybank Kim Eng senior economist Chua Hak Bin said last month's slight rise in the index could be a sign the factory slowdown has bottomed out, though it could just be a temporary respite.

The increase in new orders could be a result of manufacturers front-loading output in anticipation of tariff hikes from the US and China that are slated to take effect on Dec 15, Dr Chua said.

He said the consumer electronics sector will be hit hardest by the levies, adding: "The concern would be whether the tariffs would eventually affect the manufacturing sectors again next year."

United Overseas Bank economist Barnabas Gan said the improvement in the overall PMI provides some cautious optimism that the manufacturing sector is on track to stabilise in this quarter after the relatively weak performance in the first half of the year.