PMI inched up to 48 in June
This is the fifth month of contraction for the overall manufacturing sector.
The Purchasing Managers’ Index (PMI) inched up by 1.2 points from the previous month to 48 in June, according to data from the Singapore Institute of Purchasing and Materials Management (SIPMM). This is the fifth month of contraction for the overall manufacturing sector.
The latest PMI reading was attributed to slower contractions in the key indexes of new orders, new exports, factory output, employment, and supplier deliveries.
The inventory index continued to expand for the second month, whereas the finished goods index reverted to a contraction after expanding in the previous month. Slower contractions were recorded for the indexes of imports, input prices, and order backlog.
The overall employment index for the manufacturing sector has now posted contractions for five consecutive months.
“The June easing of Singapore’s circuit breaker measures in two phases has enabled more factory operations, but weak global demand has held back growth in the manufacturing sectors. Local manufacturers are concerned about the declining global demand arising from the pandemic controls and trade disputes of the major economies,” said Sophia Poh, vice president of industry engagement and development.
Similarly, the electronics sector PMI recorded an increase of 1.4 points from the previous month to post a slower contraction at 47.6. This is the fifth month of contraction for the electronics sector. This was attributed to slower contractions in the key indexes of new orders, new exports, factory output, employment and supplier deliveries.
Meanwhile, the electronics inventory index continued to expand for the second month, whereas the electronics finished goods posted contraction at a faster rate. The electronics indexes of imports and order backlog recorded slower rates of contraction, whereas the electronics input prices index posted an expansion reading for the first time.
UOB’s economist Barnabas Gan notes that Singapore’s economic prognosis may still stay soft in H2 2020, given the slowdown of global demand amidst the uncertainty over how the pandemic could evolve in the coming months, and the risk of a spike in infection in Singapore’s key trading partners.
However, UOB warns of further contraction in the employment index which printed at sub-50 for the fifth straight reading. Singapore’s labour market is still expected to stay weak despite the introduction of Phase 2 reopening, whilst the unemployment rate is expected to rise to 3.5% with upside risk.
On the other hand, Singapore’s senior minister of state for trade and industry Chee Hong Tat commented that company closures will likely see an “uptick” in coming months post-April, whilst the formation of new businesses will stay subdued.
Separately, the inventory index rose for its second month, which may have been led by potential re-stocking behaviour amid the lack of global demand.