Singapore’s PMI contracts for first time in nine months in December
- POSTED: 06 Jan 2014 22:57
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Manufacturing activity in Singapore contracted for the first time in nine months in December 2013. Overall Purchasing Managers' Index (PMI) fell to 49.7, down 1.1 points from November's 50.8.
SINGAPORE: Manufacturing activity in Singapore contracted for the first time in nine months in December 2013, taking many economists by surprise.
The market had earlier projected an expansion in Singapore's factory activity, and an improvement over November.
For now, economists told Channel NewsAsia they still expect manufacturing activity in Singapore to improve this year.
Singapore's factory activity contracted in December 2013. Overall Purchasing Managers' Index (PMI) fell to 49.7, down 1.1 points from November's 50.8.
A reading below 50 indicates that the manufacturing economy is shrinking.
Still, some economists are encouraged by continued growth in new orders and new export orders for the electronics and overall manufacturing sectors.
This suggests that business sentiment remained positive.
Leong Wai Ho, senior economist at Barclays, said: “We would generally expect PMI readings to tick higher in the first quarter of this year, in Southeast Asia, including Singapore. But there are also distortions in the data. Lunar New Year, for example, when factories may be operating on lower utilisation rates ahead… because of labour shortages, that may be a constraining factor on production decisions and purchasing decisions.”
Elsewhere, the latest PMI readings from South Korea and Taiwan showed improved manufacturing activity, which economists said could overflow to Singapore.
While most economists' forecasts are in line with the official forecast of 2 to 4 per cent gross domestic product (GDP) growth this year, some economists still see headwinds coming from uncertainties in the US and Europe.
Irvin Seah, senior economist at DBS, said: “Although we are seeing some improvement in the US economy, the recovery is still not cast in stone. I think the US economy will continue muddle on with sluggish recovery this year. We have seen some improvement in consumption. But there are also risks in the labour market.
“On the other hand, the Eurozone is no longer a drag to the global economy. But that being said, the problem that European countries face is more of a structural issue, which will take time to resolve.”
The US economy grew 4.1 per cent in the third quarter, while the Eurozone economy registered a 0.1 per cent growth.