Singapore: Manufacturing PMI surprises to the upside – UOB

UOB Group’s Head of Research Suan Teck Kin, CFA, and Associate Economist Jester Koh, assess the latest PMI readings and their prospects in Singapore.

Key Takeaways

Singapore’s manufacturing prospects improved further as the latest Purchasing Manager’s Index (PMI) rose 0.2pt to 50.1 in Sep (from 49.9 in Aug), the first expansionary (above 50) reading recorded since Jul 2022 (Overall: 50.1, Electronics: 50.5), marking the 4th consecutive month of improvement. Similarly, the electronics sector PMI increased 0.3pt to 49.8 in Sep (from 49.5 in Aug), recording the third successive month of improvement but the reading remains contractionary (below 50) for 14 months in a row.

Singapore Manufacturing PMI Outlook – While we are heartened by the expansionary reading recorded in Sep’s overall PMI and some of its subindices, headwinds in the manufacturing sector remain given the weak external demand, which could persist for the rest of 2023, exacerbated by tight financial conditions stemming from an elevated interest rate environment. As for the improvement in the Sep electronics PMI, we remain hesitant to call for a trough in the current electronics downcycle as the reading still remains contractionary (below 50) but the latest improvement in order backlog for both the overall manufacturing and electronics sectors is an encouraging sign for demand recovery.