Business

Singapore’s factory growth slows again last month

This article is more than 12 months old

Electronics sector marks first contraction after 27 straight months of growth

Singapore's factory growth slowed again last month, with the key electronics sector contracting further amid a weakening of the outlook for the sector globally and the fallout from the trade dispute between the US and China.

The overall Purchasing Managers' Index (PMI) dipped 0.4 point last month, reaching 51.1. A reading above 50 indicates growth.

The electronics sector, which marked its first contraction after 27 consecutive months of growth in November, dipped 0.1 point to 49.8 last month, the Singapore Institute of Purchasing and Materials Management (SIPMM) said yesterday.

The readings "did not come as much of a surprise as the regional manufacturing PMIs released earlier were also telegraphing weakness", said OCBC Bank head of treasury research and strategy Selena Ling.

China's official manufacturing PMI, released on Monday, sank into contraction territory for the first time since July 2016, while the Caixin manufacturing PMI released on Wednesday also contracted to 49.7, its lowest since May 2017.

South Korea, Taiwan and Malaysia also saw their manufacturing PMIs in contraction territory.

While Singapore's manufacturing PMI in December was still in expansion - for the 28th consecutive month - Ms Ling said: "Given the broad macro backdrop of tepid global growth prospects and slowing global demand for electronics, the likely trajectory is for the manufacturing PMI to continue to lose altitude in coming months."

The current reading is likely due to non-electronics providing a buffer to weakness in the electronics sector and probably due to the biomedical sector, she added.

The SIPMM said in its report yesterday that the lower overall PMI was due to slower growth in new orders and new exports, factory output, inventory, as well as employment level. It is the lowest recorded reading since July last year.

United Overseas Bank senior economist Alvin Liew said the weaker PMI is likely related to a slowdown on China's growth and demand for Singapore's goods and services tied to it.

Although the recent fourth-quarter gross domestic product numbers showed a "rebound in manufacturing activity in Singapore, looking forward, we are of the view that things will start to slow down".

"Perhaps the slight bump upwards in (manufacturing) numbers that we saw in the fourth quarter can be attributed to a front-loading of goods but once that is over, there will probably be uncertainty in how trade negotiations between the US and China will go," Mr Liew said.

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