Manufacturing activity in Singapore remained buoyant in December 2020 for the sixth consecutive month.
Data released by the Singapore Institute of Purchasing and Materials Management (SIPMM) on Jan 4 shows a 0.1 point month-on-month expansion in the republic’s Purchasing Manager's Index (PMI) to 50.5.
This marks the highest level the index has been at since March 2019 when it was 50.8 points.
December’s reading follows the 50.4 point expansion logged in the month before.
The PMI index is a key barometer indicating a nation’s manufacturing activity. A reading above 50 indicates an expansion in output, while that below 50 points to an industry shrinkage.
SIPMM attributes the latest showing to slightly higher expansion rates in the indexes of new orders, factory output and inventory.
Meanwhile, the electronics PMI edged up by 0.1 points to 51.2 points, making this the metric’s fifth consecutive month of expansion. Interestingly, this marks its highest reading since the 51.4 recorded in September 2018, SIPMM notes.
To Selena Ling, head of treasury research and strategy at OCBC Bank, the expansions seen in the overall and electronics PMI readings “affirm[s] the picture painted by the advance 4Q20 GDP growth estimates which showed that the domestic manufacturing sector remained relatively resilient into 4Q20 with 9.5% year-on-year growth”.
This “also bodes well for the growth momentum into 1Q2021,” she adds.
Overall, Singapore’s economy shrank by 3.8% year-on-year in the last quarter of 2020, bringing its full-year GDP contraction to 5.8%, according to advance estimates released by the Ministry of Trade and Industry (MTI) on Jan 4.
See: Singapore's GDP contracted by 5.8% in 2020, says MTI's advance estimates
Even so, the employment index for the manufacturing industry shrank in the last month of 2020 – making this its eleventh consecutive month of contraction.
Still bright spots were seen in the new exports index which posted a lower expansion rate, which Ling reckons is the result of a pickup in domestic orders. Expansions were also seen in the employment index of the electronics sector for the second consecutive month.
This is despite the contractions seen in electronics’ supplier deliveries of the eleventh consecutive month – which SIPMM views as a possible indication of supply chain disruptions ensuing from the Covid-19 induced restrictions imposed around the world.
Drawing reference to the slowing growth of China’s manufacturing PMI, OCBC’s Ling mulls that the manufacturing readings of Asian countries may mirror the superpower’s performance by peaking or nearing a peak in the coming months.
Nonetheless, Sophia Poh, vice president for industry engagement and development at SIPMM says, “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."
Ling agrees, stating that “if electronics, pharmaceuticals and precision engineering industries can sustain into 2021, the manufacturing sector should continue to see positive single-digit year-on-year growth this year, albeit it may moderate slightly from the 7.1% year-on-year growth seen in 2020”.
