Singapore firms anticipate stronger orders post CNY lull

Here's its impact on PMI figures.

According to DBS, PMI figures (February) is due this evening and market is expecting the numbers to stay fairly unchanged from the previous month.

Overall manufacturing PMI posted a reading of 50.5 in January after a brief dip into contraction territory 49.7 in December. In addition, electronics PMI staged a strong showing in January too, posting a reading of 52.0.

Here's more:

Consensus is optimistic that such healthy showing in the manufacturing sector will remain even despite the disappointment in January industrial production index.

The headline IPI number turned in a disappointing 3.9% YoY rise against market expectation of a 6.5% expansion. In fact, the sequential slide was even more acute. Output slipped by 8.1% MoM sa with pullback across all key clusters.It may appear peculiar that the IPI has worsened despite the uptick in PMIs.

But plainly, the slip in IPI has more to do with the Chinese New Year lull than a decline in external demand. The spike up in PMIs reflects the fact that companies are anticipating stronger orders beyond the festive season.

This is supported by the healthy pick-up in the new orders and production indexes for both manufacturing and electronics sectors. The increase in the inventory index also suggests some degree of restocking in anticipation of higher demand.

While it remains to be seen whether the purchasing managers will be right in their assessment about future demand, the gradual improvement in global economic conditions in recent months probably has buttressed that expectation.

Nevertheless, there will be more clarity on the outlook of the manufacturing sector after we get past this festive season effect in Jan-Feb.