Singapore’s early factory activity barometer dropped deeper into negative territory in March, as the deadly Covid-19 pandemic worsened, according to industry figures released on Friday.
The overall Purchasing Managers’ Index (PMI) reading fell to 45.4, down by 3.3 points from the month before, pointing to a second month of contraction for the manufacturing sector.
Meanwhile, the linchpin electronics industry came in at 44.1, lower by 3.5 points month on month. The reading was dragged down by steeply lower output, new exports and new orders.
Both the overall and electronics PMI are now plumbing depths not seen since February 2009, during the global financial crisis. Readings below 50 indicate contraction on the previous month.
In fact, every sub-index measured by the PMI was down and in the red in March – including new orders, new exports, inventory levels, input prices and employment.
“The Covid-19 pandemic has greatly impacted the manufacturing sectors as companies struggle to contain financial losses from sharp revenue reductions,” said Sophia Poh.
Ms Poh is vice-president of industry engagement and development at the Singapore Institute of Purchasing and Materials Management, which compiles the data.
The latest numbers would not go amiss in the rest of the region, where South Korea, Indonesia, Malaysia, the Philippines and Thailand are also posting declining and contractionary PMI readings.
“The bigger worry to us now is whether the global fallout will start to dampen China’s expected recovery in Q2, at the same time that orders to EM Asia (Emerging Markets Asia) from the major economies in Europe and the US may start to be cancelled or scaled back,” Barclays economists said on Thursday.
“While the initial hit to EM Asia from the Covid-19 outbreak was concentrated in services, the now more generalised demand slowdown across the globe will start to hit manufacturing,” they added, guiding for the region’s manufacturing PMI to “stay subdued” until at least June.
Meanwhile, the Monetary Authority of Singapore warned earlier this week that “growth in the trade-related industries will be weighed down by the decline in external demand and supply chain disruptions”. Official forecasters are projecting a recession that will see the Singapore economy shrink by between 1 per cent and 4 per cent year on year in 2020.
Still, private-sector analysts believe that the economic contraction could go even deeper. Nomura watchers last week predicted a recession of up to 9.8 per cent in Singapore, writing that “the manufacturing sector is exposed to a sharp drop in global demand and supply chain disruptions”.
Source: The Business Times