While electronics remained the main driver of manufacturing output, its PMI also fell. - ST FILE
SINGAPORE: Leading indicators for Singapore’s manufacturing sector posted back-to-back deceleration for the first time in almost two years.
The purchasing managers’ index (PMI) – a barometer of the sector – dipped another 0.2 point in February to 50.7, down from January’s 50.9 points.
Readings above 50 indicate growth; those below point to contraction.
While electronics remained the main driver of manufacturing output, its PMI also fell – slipping to 51 points in February, from 51.1 the previous month, according to data from the Singapore Institute of Purchasing and Materials Management on March 3.
Associate Professor Goh Puay Guan from NUS Business School’s Department of Analytics and Operations said that despite the deceleration, both the manufacturing and electronics PMIs remain positive.
“This could indicate that some of the front-loading effects that we saw last year – with manufacturing and inventory build-up in response to trade uncertainties – could be wearing off,” he noted.
In contrast, DBS Bank economist Chua Han Teng felt that the PMIs “showed an increasingly mixed outlook for the manufacturing sector”.
Dr Chua Hak Bin, senior economist at Maybank Research, echoed the sentiment.
He said the softer PMIs suggest that “the manufacturing recovery is losing momentum”, and that “policy uncertainty and a broadening global trade war are dampening the manufacturing outlook”.
Nevertheless, the picture across the majority of Asian economies seems more upbeat, particularly those in Asean.
Meanwhile, Singapore, the Philippines and India showed slower growth, whereas only Malaysia and Vietnam remain in contraction.
In the Republic, only the supplier deliveries sub-index registered an acceleration for both the overall and electronics PMIs.
Prof Goh noted that this implies “delivery lead times have improved”. Coupled with the slower growth of backlogged orders, this suggests that “supply is gradually catching up to demand”.
In comparison, the majority of sub-indexes – including those for stocks of input purchases, input prices, employment and future business – slowed for both PMIs.
DBS’ Chua said the continued expansion of certain indicators suggests “still-positive external demand for Singapore’s manufactured goods... should support real manufacturing output growth – at least in the first half of 2025”.
He felt that the broad-based slowdown in the majority of PMI sub-readings “highlights the fragility of Singapore’s current manufacturing expansion beyond the near term”.
“The vulnerability is exacerbated by elevated global trade policy uncertainty arising from potentially higher US tariffs on a broader list of US trading partners,” he said, adding that “escalating global trade tensions pose the biggest downside risk to Singapore’s trade-dependent economy beyond the near term”.
Separately, OCBC Bank chief economist Selena Ling noted that both new orders and new export orders are at their weakest since June 2024. She said this “could be a reflection that external demand conditions have softened”.
However, she was heartened by the contraction in input prices for the manufacturing sector, which suggests that “supply chain issues aren’t as pressing as was implied by global news headlines”, and the deceleration in the employment sub-index for both the overall and electronics sectors seems “somewhat reassuring”.
Notably, the future business sub-index for both manufacturing and electronics has softened for four straight months despite remaining in expansion territory, she noted.
“Our forecast is for the manufacturing sector to expand by 2.7 per cent year on year in 2025, moderating from the 4.3 per cent growth seen in 2024.”
Looking ahead, Dr Chua said: “There’s a risk that the PMI may contract in the second half if Trump does go ahead with his tariff threats on Canada, Mexico and China.”
He added: “We are forecasting GDP (gross domestic product) growth to moderate to 2.6 per cent in 2025, down from 4.4 per cent in 2024.”
Ling noted: “While Asean, including Singapore, may likely continue to benefit from any diversification of foreign direct investment flows, the potential threat of tariffs remains the proverbial sword of Damocles.” - The Straits Times/ANN
Unlock 30% Savings on Ad-Free Access Now!
