Sentiment among Singapore manufacturers saw a marginal improvement in August but remained in negative territory for the fourth consecutive month as the escalating US-China trade war continued to cast a shadow on the sector.
Purchasing Managers’ Index (PMI) – an early gauge of factory activity – edged up by 0.1 point from the previous month to record a slower rate of contraction at 49.9 in August.
A reading above 50 indicates the manufacturing economy is expanding, while one below 50 shows a general decline.
The slight uptick in August was due to the marginal expansion posted in new orders, factory output, as well as a slower contraction in inventory, the Singapore Institute of Purchasing and Materials Management (SIPMM) said in its report on Tuesday (Sept 3).
“Despite the ongoing global trade uncertainties, anecdotal evidences of the survey suggest that foreign manufacturers are exploring opportunities to collaborate with local manufacturers to overcome the high tariffs imposed on their countries,” said Ms Sophia Poh, SIPMM vice-president for industry engagement and development.
Maybank Kim Eng senior economist Chua Hak Bin said that while the small rise in August’s index could be a sign of the factory slowdown bottoming out, it could also just be a temporary respite.
The increase in new orders could be a result of manufacturers front-loading their orders in anticipation of US-China tariff hikes which are slated to take effect on Dec 15, Dr Chua noted, adding that the consumer electronics sector is set to be hit hardest by these tariffs.
“Of course, the concern would be whether the tariffs would eventually affect the manufacturing sectors again next year,” he added.
The PMI for the electronics sector also recorded a 0.1 point increase from the previous month to 49.4, although it continued to contract for the 10th consecutive month.
The small improvement was caused by slower contraction of new orders, inventory and employment level.
OCBC Bank head of treasury research and strategy Selena Ling said that the index for the electronics sector “likely reflected business concerns over the escalating US-China trade tensions which culminated in the latest round of tariff retaliation that kicked in on Sept 1”.
“Barring the materialisation of the US-China face-to-face trade talks that are expected to resume in Washington later this month, there is little prospect of a near-term pick-up heading into the seasonal Christmas period,” she said.
Singapore has not been the only country with shrinking factory activity in August, with the regional manufacturing sentiment remaining mixed, suggesting stabilisation at best, if not modest slippage, Ms Ling noted.
She pointed out that while China’s Caixin PMI recovered to 50.4 in August from 49.9 the previous month, manufacturing PMIs remained in contraction territory for other countries such as South Korea and Indonesia.
Source: The Straits Times