Singapore’s manufacturing PMI improves in June but fails to break out of contraction

The June reading of the Purchasing Managers' Index (PMI) came at 48 points.

Singapore manufacturing sentiment picked up again in June as the “circuit breaker” ended, but remained in negative territory for the fifth straight month, according to data out on Friday.

The Purchasing Managers’ Index (PMI) reading for June stood at 48.0 points, up by 1.2 points on the month before, although the pace of its recovery cooled from a 2.1-point increase in May.

Meanwhile, the PMI for Singapore’s linchpin electronics cluster was up by 1.4 points to 47.6. The rise in this segment was also slower than the previous month’s 3.4-point increase.

The Singapore Institute of Purchasing and Materials Management (SIPMM), which compiles the data, attributed the weak improvement to the novel coronavirus pandemic.

Singapore enacted a two-month shutdown of non-essential business and social activities – the so-called “circuit breaker” – in April and May to curb the spread of the deadly virus.

“The June easing of Singapore’s ‘circuit-breaker’ measures in two phases has enabled more factory operations but weak global demand has held back growth in the manufacturing sectors,” said Sophia Poh, vice-president of industry engagement and development at the SIPMM.

“Local manufacturers are concerned about the declining global demand arising from the pandemic controls and trade disputes of the major economies.”

The SIPMM PMI survey is an early gauge of factory activity for the month. Readings above 50 points indicate expansion, while those below 50 point to contraction.

June’s PMI uptick came on the back of slower contractions in new orders, new exports, factory output, employment and supplier deliveries, as well as imports, input prices, and order backlog. The overall inventory index also expanded, for the straight second month.

Still, Barnabas Gan, economist at United Overseas Bank, said factories’ continued negativity “suggests further headwinds against Singapore’s manufacturing and trade environment”.

“Key manufacturing sectors, save for biomedical manufacturing, could remain in the doldrums in the second half of 2020 as Covid-19 wears on,” he added.

Meanwhile, OCBC Bank chief economist Selena Ling said that Singapore’s manufacturing activity is likely to pick up in the third quarter as businesses ramp up, with the manufacturing sector expected to post “a modest expansion on-year” for the full year.

Even so, “medium-term upside potential would likely be capped by the ongoing demand”, Ms Ling said, as she noted that “the global demand shock remains and may have more persistent ramifications for the longer-term recovery trajectory”.

Source: The Business Times

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The Singapore Institute of Purchasing and Materials Management is the nation’s professional body for the LPS sector – the sector which includes professionals in Logistics, Procurement and Supply Chain. Since its founding in 1972, SIPMM has trained over 100,000 LPS professionals through its comprehensive suite of Specialised Qualifications, Executive Development Programmes as well as Specialised In-House Workshops across the region – which includes Multinational Firms, ICT Conglomerates, Governments, and the Armed Forces.

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