SINGAPORE - Manufacturing activity posted a slight contraction in March, following February’s flat growth and five months of contraction prior.
Factory activity logged 49.9 on the purchasing managers’ index (PMI) – a key indicator of trends, where a reading of over 50 indicates expansion, while one below points to contraction. The PMI was 0.1 point higher at 50 in February.
“The recent Western bank crisis has ratcheted up fears of a contagion and dampened demand in the global markets. Nonetheless, Singapore manufacturers were hopeful that China’s reopening could have a positive impact on growth in the near term,” said Mr Stephen Poh, executive director of the Singapore Institute of Purchasing and Materials Management, which issues the index, on Monday.
UOB senior economist Alvin Liew noted that the overall activity for the manufacturing sector contracted in March, “after a very brief reprieve in February” and five straight months of contraction prior.
The electronics sector PMI edged up 0.1 point from February to post yet another slower contraction at 49.4. This was the eighth consecutive contraction but was the best reading, matching August 2022, Mr Liew added.
The improvement was attributed to the slower contraction in new orders, new exports and employment, and the better expansion in electronics deliveries that offset steeper falls in electronics inventory and electronics output.
OCBC chief economist and head of treasury research and strategy Selena Ling said it would be key to see if the electronics PMI makes further headway, however gradual, towards the 50-point handle in the coming months, given hopes that the second half of 2023 will see some mild recovery in global electronics demand.
Mr Liew said UOB maintains its forecast for Singapore’s manufacturing to contract by 5.4 per cent in 2023, as most of the sub-indices within the Singapore PMIs remained in contraction territory.
He also noted further deterioration in the March S&P Global Manufacturing PMI surveys for electronics powerhouses like South Korea (47.6 in March, from 48.5 in February) and Taiwan (48.6 in March, from 49 in February).
Ms Ling noted that regional manufacturing PMIs were also a mixed bag. Japan, Malaysia, Indonesia and Myanmar improved in March, while China, Taiwan, South Korea, Thailand, Vietnam and the Philippines deteriorated, “suggesting that the near-term outlook remains fraught with uncertainty”, she said.
“(March’s) PMI reading does not shift our baseline view that the manufacturing sector will stay in the doldrums in 1H23 and only gradually stabilise in 2H23.”
