SINGAPORE – Singapore’s factory output improved across the board in August, with electronics production climbing to its highest in six years and overall manufacturing activity at its best in just over three years.
The purchasing managers’ index (PMI), a barometer of the manufacturing sector, rose to 50.9 points in August, up from 50.7 points in the previous month, according to the latest data released by the Singapore Institute of Purchasing and Materials Management on Sept 2.
Meanwhile, the electronics PMI, a key sector of manufacturing, rose to 51.3 points, from the previous month’s 51 points.
Readings above 50 points denote growth, whereas those below 50 indicate contraction.
This was the manufacturing PMI’s 12th month of expansion, while the electronics segment extended its growth streak for a 10th month.
Notably, the manufacturing sector’s sub-indexes for employment and supplier deliveries – two key underlying components that had been in contraction – turned positive in August.
In contrast, only the supplier deliveries index for electronics remained underwater for a fourth consecutive month, despite posting a 0.2 point improvement from a month ago.
Elsewhere in the region, South Korea and Taiwan maintained their upward trajectory.
In comparison, data from China showed a divide between the smaller, export-facing manufacturers that appeared to recover, versus those in the broader sector that seemed to be stuck in a rut.
Also contracting was Japan, although the impact was mitigated by firm global demand for semiconductors and a rebound in car production, while Malaysia and Indonesia remained in contraction.
Commenting on the data, Maybank Research’s regional co-head, Dr Chua Hak Bin, said: “These are very good numbers, especially in the light of China’s latest weaker manufacturing PMI.”
Echoing the sentiment, DBS Bank economist Chua Han Teng said: “We see the broad-based improvements as an encouraging sign for Singapore’s gradual factory recovery in the second half.”
He noted that this was corroborated by other recent data, such as manufacturing output, which started the third quarter on a positive note.
At the same time, Mr Chua believed that the sustained expansion of the electronics PMI suggests the potential for the cluster to outperform in the months ahead.
Dr Chua agreed, saying that the electronics recovery is broadening beyond just demand for artificial intelligence (AI) chips.
“Fresh product offerings, with AI features embedded in new mobile phones and electronic devices, will help support and broaden tech demand,” he said.
He added that manufacturers here were also benefiting from the diversification of demand and supply chains beyond China, amid intensifying US tech sanctions on the mainland. In addition, port congestions and Red Sea disruptions to trade and shipments may also be easing.
UOB associate economist Jester Koh noted that the data was indicative of a strengthening in near-term demand, as the backlogs of orders rose in conjunction with recent hard data that signalled an imminent and firmer recovery.
Looking ahead, the economic outlook may be clouded by factors such as the prospect of slowing US growth and uncertainty over the outcome of the US presidential election in November.
On the US election, Maybank’s Dr Chua said: “The economic impact will be rather binary, depending on the outcome.”
He expects a Donald Trump win to result in sweeping US tariff hikes on China and the rest of the world, disrupting both trade and investments, whereas a Kamala Harris victory will likely be less disruptive – any tariff hikes will be more targeted at China and should be less sweeping.
“Ultimately, Singapore’s small, open and trade-sensitive economy will not be spared from any escalation in a trade war,” he said.
But Dr Chua is optimistic overall. “We expect Singapore’s electronics exports and manufacturing growth to strengthen in the second half. We are forecasting GDP (gross domestic product) growth to surpass official forecasts, coming in at 3 per cent in 2024, and 2.4 per cent in 2025,” he said.
Mr Koh said that this optimism may be boosted by the lowering of policy rates by major central banks in advanced economies which, in turn, should stimulate investment and consumption activity abroad, while an eventual replenishment of inventory could provide an additional boost.