In Focus
ECONOMY, MANUFACTURING | Staff Reporter, Singapore

Has the manufacturing sector already reached its peak?

After PMI inched up, economists believe upsides will now be limited.

The manufacturing sector rally may have already peaked and is starting to run sideways, as economists from DBS Group Research see it.

According to the group, the manufacturing purchasing managers' indices only reported a 0.1 pt. to 51 in July.

"Whilst this is the 11th consecutive months of expansion, the rally has pretty much peaked. Indexes for new orders, new exports, and factory output have continued to march north but the overall reading was drag down by lower inventory level and contraction in employment," DBS Group Research said.

The electronics sector, which has always been the stellar performer, only recorded a 0.1 pt PMI increase, still driven by consumer demand.

"Whilst companies’ capex spending may be increasing, they may not be enough to pick up the slack from potentially weaker consumer demand ahead," the brokerage firm added.

Moving forward, PMIs are not expected to fall back into the red. However there will be a limited upside from here on as production capacity in some industries are nearing their limits.

It is also important to note the relationship between Singapore's manufacturing sector and the consumer demand in China.

"Tighter credit conditions, stiffer regulations on the property market and slower growth in general, could weigh down on consumer sentiments and companies’ willingness to increase their capex, which will indirectly affect Singapore’s manufacturing sector," DBS Group Research said.

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