Singapore's manufacturing sector to run sideways following its peak

Overall manufacturing PMIs edged modestly in June.

The latest reading of the purchasing managers' indices could mean that the electronics sector is now running sideways.

Overall manufacturing PMIs edged modestly higher to 50.9, up 0.1 from the previous month. According to DBS Group Research, the sub-indexes were pretty mixed, with new orders, including exports, as well as output, inventory, and stocks of finished goods rising higher.

However, indexes such as imports, employment, backlog, and supplier deliveries are dipping lower.

"The tapering off in the overall manufacturing PMI is consistent with our view that the manufacturing rally has peaked and is beginning to run sideways," DBS Group Research said.

More so, the electronics sector, which has been the main driver of this rally, is already losing steam. Electronics PMI moderated to 52.1 in June 2017, from 52.4 previously.

"The strong performance in the electronics cluster thus far has been largely driven by consumer demand. To sustain the current pace of expansion, much will really depend on companies increasing their capital expenditure going forward," DBS Group Research said.

With this, the outlook for the manufacturing sector in the coming months is expected to be tepid.

DBS Group Research said, "There are signs that suggest demand from China may wane in the coming quarters. Tighter credit conditions, stiffer regulations on the property market, and slower growth in general, could weigh down on consumer sentiment and companies’ willingness to increase their capex, which will indirectly affect Singapore’s manufacturing sector."

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