Singapore manufacturing activity picks up in March but electronics still in decline

The overall manufacturing PMI in March stood at 50.8, up 0.4 percentage point from February, which saw the lowest reading since November 2016.

Singapore’s factories finally picked up the pace in March after months of battering from the global slowdown in electronics demand.

The Purchasing Managers’ Index (PMI), a key barometer of economic activity in the manufacturing industry – came in at 50.8 last month, up 0.4 points on February.

A reading over 50 indicates expansion; one below points to contraction.

March’s reading marks the 31st consecutive month of expansion.

The Singapore Institute of Purchasing and Materials Management (SIPMM), which compiles the index by surveying around 150 industrial companies, attributed the rosier performance to faster growth in new orders and inventory in March.

The electronics PMI also edged up, hitting 49.8 in March from 49.5 in February but still in the negative mode its been in since November.

Within the electronics sector, the indexes for new orders and exports continued to contract for the third month, while factory output declined for the fourth month in a row.

However, the SIPMM noted that March’s improvement in the order backlog index for the whole manufacturing industry was not enough to change the contraction seen in the past six months. This index tracks the amount of manufacturing orders yet to be completed.

Ms Selena Ling, OCBC Bank head of treasury research and strategy, said the backlog indices suggest that overseas demand has not rebounded.

She added that unless business and consumer confidence picks up, the manufacturing industry or the electronics sector is not likely to be a growth driver for Singapore’s economy in this half of the year.

That said, Singapore’s PMI figures follows the “tentative economic green shoots” seen in China’s and United States’ manufacturing indexes last month.

China’s PMI turned a corner in March, rising to 50.8 from 49.9 in February, while the PMI in the US rose from 54.2 to 55.3 in March.

“Pending a convincing resolution of the United States-China trade talks, we would interpret these initial signs as suggestive of spring following a harsh winter,” said Ms Ling.

Mr Frederic Neumann, co-head of Asian Economics Research at HSBC, also noted that the March PMIs of Japan, South Korea, Taiwan, and Malaysia remain under the 50-point threshold.

“The global backdrop continues to look challenging – the contraction in new export orders deepened, led by Europe, and with much of Asia losing further ground,” he said. “March, perhaps, points in the right direction, but there’s still a steep hill to climb.”

Source: The Straits Times

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