July factory orders up, but economists are sceptical
By Robin Chan
THE latest survey of factory orders here suggests that the manufacturing sector is on its way to a recovery from a rough patch.
But economists are wary about reading too much into last month’s figures for the Purchasing Managers’ Index (PMI), a survey of purchasing executives at over 150 manufacturing companies.
They are now questioning the credibility of the closely-watched monthly survey, which is supposed to give a snapshot of industrial health. The PMI posted an improved reading for a second straight month in July.
Citigroup economist Chua Hak Bin said: ‘The index has lost credibility. There is some disconnect between what it suggests is happening and what is actually happening.’
United Overseas Bank economist Alvin Liew said: ‘We probably should not read too much into (last month’s) positive PMI report.’
Last month’s figure rose by a percentage point over June to 53.3. Any figure above 50 indicates expansion in the industrial sector.
The Singapore Institute of Purchasing and Materials Management produces the report. Its executive director, Ms Janice Ong, said the rise in last month’s PMI was ‘driven by continued healthy growth in the overall manufacturing and electronics new orders, as well as new export orders’.
In June, the PMI recorded its biggest one-month gain in more than five years but factory output that month turned out to be weak, according to data compiled by the Economic Development Board (EDB).
The June index showed that the key electronics sector expanded for the 12th consecutive month.
The electronics sector, however, has been in a slump for months. Last week, the EDB’s electronics output data showed that the sector shrank by 0.7 percentage points in June from a year earlier. This was its worst performance so far this year.
However, Action Economics director of Asian economic forecasting David Cohen said June’s output figures were low perhaps because orders for electronics were just coming in.
Despite the contradictory figures, he said: ‘Overall, the PMI is still in line with the message from around the region that manufacturing is entering the second half on a positive note
Source : Straits Times - 02 Aug 2007
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