SINGAPORE – Mobility curbs at home and abroad to contain a flare up of Covid-19 slowed manufacturing activity in Singapore last month, even as the sector grew for an 11th month.
However, analysts said that, assuming the Covid-19 curbs are lifted as scheduled, the full-year trajectory for the manufacturing sector remains sound.
The Singapore Purchasing Managers’ Index (PMI) for last month posted a surprise retreat of 0.2 points from April to record a weaker rate of expansion at 50.7, according to data released on Wednesday (June 2).
Economists in a Bloomberg poll had forecast a median of 51 points for the month, up from April’s 50.9, which was the highest reading since December 2018 – when the PMI came at 51.1.
A reading above 50 indicates expansion; one below indicates contraction.
Singapore imposed phase two (heightened alert) restrictions on May 16 to stamp out a surge in local infections. The curbs, the tightest since the circuit breaker last year, are expected to be eased after June 13.
Several Singapore trading partners also imposed new lockdowns with varying intensities last month. They include, among others, Australia, Japan, Taiwan, Malaysia and Thailand.
The Singapore Institute of Purchasing and Materials Management (SIPMM), which compiles the monthly PMI report, said that the PMI reading for last month was attributed to slower expansion rates in the sub-indexes of new orders, new exports, factory output and employment.
Ms Sophia Poh, vice-president for industry engagement and development at SIPMM, said: “The heightened alert measures introduced in May have affected the manufacturing sector, but the extent will depend on the duration of the tightened measures.”
On the flip side, the supplier deliveries index reverted to a marginal expansion, and the inventory index posted a faster expansion rate, the PMI report said.
The indexes of input prices and order backlog also recorded faster rates of expansion, while the overall employment index expanded for the third straight month.
The order backlog grew for an 11th consecutive month.
Ms Poh said that anecdotal evidence suggests that manufacturers are facing delivery postponements instead of order cancellations.
“This could explain the faster supplier deliveries with increasing order backlog,” she noted.
The electronics sector PMI expanded for the 10th consecutive month, but fell 0.3 point from the previous month to a slower expansion of 50.4.
The drop was attributed to a slow down in new orders, new exports, factory output, inventory, and employment.
However, supplier deliveries, stocks of finished goods, input prices and order backlog posted faster expansions.
The electronics employment and the electronics order backlog indexes have now recorded seven and 11 consecutive months of expansion respectively, the report showed.
UOB economist Barnabas Gan said that, barring an exacerbation of Covid-19 infections, the manufacturing sector is expected to be one of the key pillars of growth this year.
“Singapore’s export-oriented industries are expected to ride on the winds of global trade growth, which should subsequently benefit externally facing sectors such as manufacturing, wholesale and retail trade, and financial services,” he said.
Mr Gan expects Singapore’s manufacturing to grow by 5.5 per cent this year.
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