Singapore: Signs of exhaustion in the manufacturing sector?

Senior Economist at UOB Group Alvin Liew reviews the latest PMI results in Singapore.

Key Takeaways

“Singapore’s manufacturing Purchasing Managers’ Index (PMI) edged slightly lower by 0.2 point to 50.1 in Jul, the 25th straight month where PMI stayed above the 50.0 mark, indicating an overall expansion in activity. The electronics sector PMI also followed suit, with a 0.3-point decline to post a slower rate of expansion at 50.5 in Jul.”

“Both the headline and electronics PMI recorded slower expansion rates for new orders, new exports, factory output and imports index. It was also noted that their respective input prices index remained elevated but eased slightly from Jun while their employment index continued to expand but at a slower pace.”

“Manufacturing Outlook – The latest PMI number was in line with the weaker manufacturing PMI prints seen across North Asian economies. In contrast however, the PMI numbers from other ASEAN economies were more resilient and saw higher prints in Jul, likely benefiting from improving domestic demand as their economies re-open. The easing of input prices may indicate improvement in supply chain issues but the lower readings for new orders, exports orders, imports and inventory, raised concerns about demand (in particular, for electronics), especially when overlaid with the weaker global growth outlook. In addition, we are mindful of the external risks due to the on-going Russia Ukraine conflict, COVID-19 related supply chain disruptions and a broadly slower global growth outlook. The latest PMI outcome does not change our growth forecast for Singapore’s manufacturing, but we note the simmering downside risks. For now, we maintain our manufacturing growth forecast at 4.5% in 2022 (from 13.2% in 2021) while our full year 2022 GDP growth forecast is also unchanged at 3.5%.”

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