Thursday, 21 October, 2021

Singapore factory sentiment expands more slowly in Sept

Singapore factory sentiment expands more slowly in Sept

SINGAPORE: Singapore’s overall manufacturing sentiment inched lower for the second straight month in September, as growth cooled in the non-electronics segment, according to a monthly gauge released on Monday by the Singapore Institute of Purchasing and Materials Management (SIPMM).

The slower expansion tracked broader regional caution, and raised concerns of a weakening export environment for manufacturers amid price pressures from costlier commodities, report agencies.

While the latest SIPMM Purchasing Managers’ Index (PMI) showed expansion in the manufacturing sector for the 15th straight month, OCBC chief economist Selena Ling has suggested that “momentum could have peaked and an imminent slowdown is on the cards”.

The headline PMI reading dipped to 50.8 points in September, from 50.9 in August, on slower expansion in new orders, new exports, factory output, inventory and employment.

Granted, the electronics industry grew at a faster clip, with the electronics PMI picking up to 51.2 points, from 51.0 in the month prior. Still, the segment’s inventory, employment and finished goods indices increased more slowly, while the electronics supplier deliveries index shrank after eight months in positive territory.

PMI readings above 50 points indicate an expansion, while those below 50 points represent a contraction.

Meanwhile, Sophia Poh, SIPMM’s vice-president for industry engagement and development, also said: “Supply chain disruptions are still plaguing local manufacturers as they struggle to cope with reduced margins from the higher cost pressures.”

That is as the overall and electronics input price indices both rose by 0.3 point - to 51.7 points overall and 52.5 for the electronics segment.

Said Ms Ling: “As inventory levels edge lower for both the domestic manufacturing and electronics sectors, the ability to sustain production in the run-up to the Christmas season may be at stake... The ability to pass on some of the higher costs to end-consumers would also be key.”

UOB economist Barnabas Gan attributed the recent overall manufacturing PMI decline to “a slightly softer external environment”, adding that it was in line with other regional data that showed slowing export growth.

Indeed, industry research firm IHS Markit’s Asean manufacturing PMI stood at the neutral 50.0 point mark in September, against 44.5 in August.

IHS Markit noted the reading “signalled no change in manufacturing conditions on the month”, and IHS Markit economist Lewis Cooper added that “the sector remains on an uneven footing”.

Mr Cooper cited inflationary pressures from a steep increase in costs, as well as the whammy of regional Covid-19 outbreaks on producers: “Until this subsides, it’s unlikely we will see a meaningful return to growth for the manufacturing sector.”