Singapore factory activity expands for sixth month running in December

SINGAPORE – Manufacturing ended a tumultuous year on a high note, with factory activity up again in December – its sixth consecutive month of expansion.

Experts say the sector will continue to be a key driver of economic growth in 2021, but warned that this could be tempered amid restrictions as the coronavirus continues to spread globally.

The Singapore Purchasing Managers’ Index (PMI) – a key measure of activity – inched up 0.1 points in December from November to 50.5, according to data out on Monday (Jan 4).

A reading above 50 indicates expansion; one below points to contraction.

The electronics sector posted growth for the fifth straight month, with expansion of 0.1 points from November to a level of 51.2 – the highest reading since the 51.4 recorded in September 2018.

Last month’s manufacturing growth was attributed to slightly higher expansion rates in the indexes of new orders, factory output and inventory, said the Singapore Institute of Purchasing and Materials Management (SIPMM), which publishes the monthly PMI readings.

The employment index also shrank more slowly but has recorded contractions for 11 consecutive months.

However, the new exports index posted a lower expansion rate, suggesting that the higher growth rate in new orders is being fuelled by domestic consumption.

The employment index continued to expand in the electronics sector for the second month.

But the electronics supplier deliveries index recorded contraction for the 11th consecutive month, indicating possible supply disruptions due to Covid-19 restrictions around the world, noted the SIPMM.

Ms Sophia Poh, SIPMM vice-president for industry engagement and development, said: “It is heartening to note that the (manufacturing) sector is looking ahead to a brighter outlook for the new year, even though it will take some time before wide-scale vaccination programmes can be implemented globally.”

OCBC Bank head of treasury research and strategy Selena Ling agreed that while manufacturing has been the silver lining in 2020, global demand and recovery will be very much dependent on the Covid-19 situation and vaccination progress.

“If there is further progress made towards the reopening of borders later this year, this may aid the recovery in business and consumer confidence,” she said.

She noted that the slowing growth of China’s manufacturing PMI suggests that momentum may have peaked or is nearing a peak, which may be mirrored in other Asian manufacturing readings in the coming months too.

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Maybank Kim Eng senior economist Chua Hak Bin said: “Manufacturing will continue to expand at a healthy pace in 2021, but will likely moderate from the strong growth seen in 2020.

“Demand may cool off because of renewed lockdowns in many developed countries. Supply response may be constrained by availability of foreign labour, due to both stricter government measures and border controls.”

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