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MANUFACTURING | Krisana Gallezo-Estaura, Singapore
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Is manufacturing sector back in the black?

Electronics’ PMI rose for the first time in 5 months but pessimism lingers.

The PMI figures announced last March 4 saw manufacturing index eased to 49.4,from 50.2 in the previous month.

The dip in the overall PMI was attributed to lower level in new orders, production output and stocks of finished goods.

On a brighter side, the PMI for the electronics cluster rose for the first time in 5 months to 52.1, from 49.9 in the previous month.

Here’s what analysts had to say:

DBS GROUP RESEARCH

The manufacturing sector is probably back in contraction mode (below 50) judging by this latest set of figures.

Plainly, the dip in overall manufacturing PMI is in line with our expectation. In fact, we had doubt the uptick in Jan13 to be sustained going into February because of the Lunar New Year effect. Production will usually slow during the festive period due to the lesser number of working daysin the month plus workers going on vacation leave.

Moreover, the earlier improvement was mainly driven by inventory restocking to caterto the lull in the subsequent month and is expected to be transient anyway. Hence, a pullback does not come as a surprise.

In addition, we had all along expect the electronics cluster to turn around due to the improving demand. But the uptick comes earlier than predicted.

Whether this improvement will be sustainable remains to be seen.

As it is, Singapore’s electronics cluster has been a laggard to the global electronics cycle. High cost, structural hollowing-out, the strong Sing dollar and the inability to be part of the regional supply chain for smartphones have affected the performance for this industry.

Beyond the recent set of PMI numbers, we’re sticking in our view that a more pronounced improvement will only be seen after the second quarter

Song Seng Wun, analyst, CIMB

Feb Tech PMI rose another 2.2 pts (Jan 13:+3.3 pts) to 52.1, the first gain in five consecutive months. Perhaps this is the first sign of a turnaround in Singapore’s tech manufacturing.

Joining their Chinese counterparts in Taiwan and China, Singapore’s factory bosses were also less busy in February as many manufacturers took time off to enjoy the Lunar New Year festivities. Factory output, as measured by the monthly PMI, dipped 0.8 pt to 49.4 after recovering 1.6 pts in Jan 13 to 50.2, its strongest monthly gain since Feb 12 (+1.7 pts, after CNY month).

Although the Feb reading came in below expectations (consensus: 50.3, CIMB: 48.9), it is more important to look at the underlying trend. On a 3MMA basis, overall PMI averaged 49.4 in Feb 13, the strongest in six months.

While others were taking a breather, tech manufacturers were kept surprisingly busier on the back of firmer orders and production.
After four consecutive months of contraction, tech PMI posted growth to 52.1, matching its previous highest reading in Oct 11. New orders jumped another 3.5 pts to 53.2 (Jan 13: +6.2 pts), the strongest reading in almost a year. Supported by the firmer orders, output rose 3.2 pts (Jan 13: +4.9 pts) to 52.4, the first expansion in five consecutive months.

While the stronger order flows in 2M13 are encouraging, this latest rebound could be temporary because manufacturers reported stronger inventory (+2.4 pts to a 6-month high of 52) while stocks of finished goods dipped 0.4 pt to 49.6, backlogs eased 0.9 pt to 51.2 and suppliers were told to slow down their deliveries (-2.1 pts to 50.8). On the positive side, the orders-to-inventory ratio of 1.10x is the highest in almost a year, supportive of further output growth. Fingers crossed.
 

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