Sep 03, 2014

    S'pore PMI hits lowest point since December

    HOPES that the downbeat manufacturing sector had turned a corner were dashed yesterday as factory activity unexpectedly shrank last month, in its worst showing this year.

    The sector, which makes up a fifth of the economy, also fared worse than its regional peers due to economic restructuring and a sluggish global recovery, local economists said yesterday.

    The Purchasing Managers' Index (PMI), a gauge of anticipated factory orders, yesterday fell to 49.7 for last month - its lowest point since December.

    A reading above 50 signals expansion while one below 50 indicates contraction.

    The figure was also 1.8 points lower than July's reading of 51.5, marking the index's biggest drop since March 2011, economists noted.

    It reversed the seven straight months of expansion seen since the start of this year, and came in below economists' expectations of a reading of 51.

    OCBC economist Selena Ling noted that the only other country in Asia that had a PMI below 50 last month was Indonesia. She said: "This is a real knock to market confidence for Singapore's manufacturing outlook for the next three to six months."

    Other manufacturing powerhouses across Asia recorded expansion last month. Taiwan's PMI came in at 55.4 and South Korea's at 50.3, while mainland China's official PMI was 51.1.

    Another reason for the drop could have been manufacturers' premature over-exuberance in July.

    DBS economist Irvin Seah said that last month's PMI drop was a "pullback" from high sentiments in July, which saw manufacturers ramp up their inventory on optimism about economic growth in the United States at that time.

    Still, Credit Suisse economist Michael Wan said that the sector will recover. "The widely anticipated pick-up in global growth has been quite patchy, but we expect things to get better."