Analyst: Manufacturing sector 'heading for the moon', Latest World News - The New Paper

Analyst: Manufacturing sector 'heading for the moon'

This article is more than 12 months old

The local manufacturing sector is on a roll and "heading for the moon", thanks to a more optimistic global outlook.

The latest sign that things are picking up came from the Purchasing Managers' Index (PMI) - an early indicator of manufacturing activity - which logged its seventh straight month of expansion in March.

The PMI came in at 51.2 last month, up from 50.9 in February. A reading of 50 and above indicates expansion.

This was also its highest reading since November 2014. Strong global demand for electronics - in particular, semiconductors - has given Singapore's manufacturing sector a shot in the arm.

"PMIs are heading for the moon," said DBS economist Irvin Seah. "The upticks... are in line with our view that the manufacturing sector is on a healthy run amid improving global demand.

"There are similar trends in some key markets such as China, the United States and euro zone, which bode well for the outlook of the sector in the near term," he added.

The PMI uptick in March was attributed to improvements in domestic and export orders, as well as higher inventory and employment.

Manufacturing employment, which had been shrinking since November 2014, expanded for the third straight month in March.

The data was compiled by the Singapore Institute of Purchasing and Materials Management from a monthly poll of purchasing executives at about 150 industrial firms.

The survey also showed PMI for the electronics sector came in at 51.8 last month, up from 51.4 in February. This was the eighth consecutive month of expansion.

OCBC economist Selena Ling said a manufacturing recovery appears to be taking root in Singapore, echoing a "similar picture seen in regional economies like Vietnam, the Philippines, India and Indonesia", among others, where PMIs have also picked up.

However, political agendas could cloud investor confidence - if not the economic outlook - in the coming months. Said Ms Ling: "Of particular interest would be the Donald Trump-Xi Jinping meeting starting this Thursday, where the US-China trade deficit is likely to top the discussion agenda and any antagonistic moves could engender an outsized financial market reaction in the near term."