Local manufacturing sees more contraction, with little respite from the rest of Asia

Singapore’s manufacturing sector continued its slump last month, posting its eleventh straight month of contraction in May.

The Purchasing Managers’ Index (PMI) released on Thursday (June 2) – an early indicator of manufacturing activity – came in at 49.8, same as the April figure.

A reading below 50 indicates contraction.

The flat reading came amidst mixed trends, said the Singapore Institute of Purchasing and Materials Management (SIPMM), which compiles the index from a poll of purchasing executives in more than 150 industrial companies.

While new orders and new exports declined, factory output increased.

There was a silver lining in the production index, which posted an expansion for the first time after 10 months of contractions. It came in at 50.1 last month, up from 49.9 in April.

But employment continued to shrink. Manufacturing employment posted a lacklustre reading, posting a fall from 49.3 in April to 49.1 last month.

SIPMM commented that the employment index has been recording ontinuous contractions since November 2014.

The electronics sector posted a PMI reading of 49.1, down from 49.5 in April.

The weakened reading was due to lower new orders and new exports, slower factory output and declining employment.

Employment in the electronics sector continued to contract for the 13th straight month, while electronics finished goods recorded the 11th month of expansion.

This indicates that electronics manufacturers are not selling their finished goods quickly enough, which creates a situation of inventory overhang and hampers employment, said the report, which is published monthly.

The gloomy PMI data isn’t unique to just Singapore, with little to cheer about in the rest of Asia.

Mr Frederic Neumann, co-head of Asia Economics Research at HSBC, called the latest PMI figures for Asia “damp and soggy.”

In a research note, he cautioned that manufacturing and exports look weak globally.

In Asia, he pointed out that headline PMIs were broadly disappointing, with China’s Caixin reading easing, along with readings for Taiwan, Japan, Indonesia. The only exception was Vietnam, he said.

In terms of new orders, he highlighted dips in Malaysia, Taiwan as well as in China, while new export orders lost ground in China, India, Taiwan, Japan and Indonesia.

He said that while employment figures were more encouraging, with manufacturers in India, Indonesia and Malaysia accelerating the pace of hiring, job growth is not strong enough to boost domestic demand.

Source: The Straits Times