Factory output shrinks, weaker outlook -Singapore
By Alvin Foo
SINGAPORE’S key manufacturing sector is still growing, but it has - for a second straight month - been expanding at a slower rate, according to a key indicator.
Also, output from the nation’s factories will weaken further and even shrink in the coming months, economists have predicted.
They say the outlook for manufacturing seems ‘pretty dim’, with a likely contraction due to an economic slowdown in the United States, Japan and Europe and this month’s festive period.
The data, released yesterday by the Singapore Institute of Purchasing and Materials Management (SIPMM), is the Purchasing Managers Index (PMI), a forward-looking indicator based on a survey of purchasing executives at more than 150 companies in Singapore.
The PMI dipped 0.5 points to 50.5 last month after falling to 51 in December from 53.8 in November. The index indicates a contraction in the sector if it is below 50, while above 50 means an expansion.
Last month was the PMI’s eighth straight month of expansion.
The PMI’s dip last month was due to a fall in new manufacturing and electronics as well as new export orders.
‘There is a cause for worry if new orders demand from the overseas and domestic markets does not pick up fast in the coming months,’ said SIPMM executive director Janice Ong. ‘Anecdotal evidence from the survey suggested that local manufacturers were faced with further slowing global demand from key foreign markets - the US and Japan.’
Economists expect the manufacturing sector to remain weak in the first half before staging a rebound.
Citigroup economist Chua Hak Bin said: ‘It should contract for the first half before seeing a recovery in the second half. We expect the US to show growth in the fourth quarter with the aggressive Federal Reserve rate cuts.’
The electronics sector PMI grew marginally at 50.8, down 1.5 points from the previous month, due to weaker growth in new orders from domestic and overseas markets.
Ms Ong said a key worry was a second month of contraction in the electronics inventory index. ‘If this contraction persists, then electronics production output will be affected and, consequently, growth in the electronics sector may be derailed,’ she warned.
Economists are pessimistic on the sector’s outlook. CIMB-GK economist Song Seng Wun said growth was likely to be subdued in the first quarter. ‘It should dip below 50 for February because of the holiday-shortened month. The snow storms in China may also affect new orders.’
Government data released last month showed that factory output slowed more than expected in December last year, setting the stage for another weak year for the sector.
Industrial output shrank 1.7 per cent, a bigger slide than November’s 0.5 per cent contraction.
Source : Straits Times - 05 Feb 2008
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