Manufacturing falls for first time in over 2 years, Latest Singapore News - The New Paper

Manufacturing falls for first time in over 2 years

This article is more than 12 months old

Singapore's PMI slips as US-China ties worsen

Manufacturing growth fell again last month to log its first contraction in more than 21/2 years, as trade tensions between the US and China intensified last month.

In an extension of a growth slowdown since early last year, Singapore's Purchasing Managers' Index (PMI), a key barometer of activity in the manufacturing industry, slipped 0.4 point to 49.9 last month from April - dipping below 50 for the first time since August 2016.

A reading above 50 indicates the manufacturing economy is expanding, while one below 50 shows a general decline.

The electronics sector PMI saw its seventh consecutive month of contraction, dipping 0.1 point to 49.4.

ING chief economist Robert Carnell saw two factors behind the decline, one being the US-China trade war, which is damaging growth prospects in China and, by extension, Chinese demand for manufactured goods made in Singapore.

The other, he said, is the global slump in technology demand and the associated tech war between the US and China.

Looking ahead, CMC Markets analyst Margaret Yang expects new orders and exports to remain weak in the months to come, as additional tariffs by the US and China kicked in around the end of last month to early this month.

"Anecdotal evidence suggests that manufacturers are increasingly concerned about the escalation of trade tensions between the world's two largest economies," said the Singapore Institute of Purchasing and Materials Management, which compiles the PMI index by surveying around 150 industrial companies.


For electronics, the latest figure was attributed to weaker readings in new orders, new exports and the employment level as well.

The slowdown in manufacturing here is part of a global trend.

"The figure is in line with a broad slowdown in manufacturing activities across the globe as cyclical slowdown deepens on the rise of detrimental trade tariffs," said Ms Yang.

Mr Carnell noted the Singapore PMI fell less than that for Malaysia, which was down 0.6 point to 48.8, and South Korea, which fell 1.8 points to 48.4.

China's Caixin PMI for last month remained unchanged at 50.2.

United Overseas Bank senior economist Alvin Liew said the outlook for manufacturing is expected to worsen further if US tariffs are imposed on the remaining US$300 billion (S$410 billion) worth of Chinese exports to the US after the Group of 20 meeting this month.

Mr Carnell added: "The environment can remain very weak, at least until there is some thawing in the trade war."

He added that while US President Donald Trump is hard to predict, he will likely have to consider the impact of the trade war on his chances of re-election, mainly through its negative effect on the stock market.

"With the election race maybe not kicking off in earnest until early next year, this leaves plenty of room for negativity in the meantime," he said.