PMI here shrinks for sixth straight month, Latest Business News - The New Paper

PMI here shrinks for sixth straight month

This article is more than 12 months old

New orders index also falls to lowest since August 2016

Manufacturing sentiment has now been in the basement for six consecutive months amid the gloomy trade environment, but positive signals from Washington and Beijing are raising hopes for a year-end revival.

For now, the general state of decline continues as the Purchasing Managers' Index (PMI) - an early gauge of factory activity - came in at 49.6 for October.

While that was up 0.1 point on September, it was still below 50, which indicates a shrinkage in factory activity.

"Anecdotal evidence suggests that several manufacturers scaled back investment plans due to the uncertain global trade environment, and such uncertainty has been disconcerting to manufacturers," said Ms Sophia Poh, vice-president for industry engagement and development at the Singapore Institute of Purchasing and Materials Management, which compiles the index.

It noted yesterday that last month's slight uptick came on the back of higher factory output, expanding inventory and a slower contraction in employment.

Ms Selena Ling, OCBC Bank's head of treasury research and strategy, added that despite the PMI's marginal improvement, new orders and new exports remained mired in negative territory.

The new orders index came in at 49.7, a 0.1 point dip from September and the lowest it has been since August 2016, when the gauge was 49.6.

This indicates that a quick turnaround for manufacturers is unlikely to materialise unless there is a significant improvement in global demand with a full resolution of the US-China trade tensions or the strengthening of major economies like Europe and China, Ms Ling said.

The key electronics sector contracted for the 12th month running, although its PMI of 49.3 was 0.2 point up on September.

Maybank Kim Eng senior economist Chua Hak Bin said: "The good news is that there are tentative signs that the manufacturing downturn is bottoming out, and how it will pan out will depend on the current US-China trade discussions."

He noted that US tariff hikes set to kick in on Dec 15 would hit the consumer electronics sector hardest.

The 15 per cent levies will apply to US$160 billion (S$217 billion) worth of Chinese imports not previously covered by US duties, including mobile phones, laptops and tablet computers.

"If the trade negotiations come to a sort of agreement or a partial deal, there might be a possibility that manufacturing may recover by early next year," Dr Chua said.