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Singapore's June PMI dips marginally to 50.5

Singapore's manufacturing sector expanded at a slower-than-expected pace, with the Purchasing Managers' Index (PMI) hitting 50.5 for June. Economists attribute the slight dip to recent weakness in electronics output.

SINGAPORE: Singapore's manufacturing sector expanded at a slower-than-expected pace last month (June), with the Purchasing Managers' Index (PMI) hitting 50.5, a slight dip from May's reading of 50.8. This is attributed to lower new and export orders, and a drop in production output.

A reading above 50 indicates expansion in manufacturing activity, while a figure below signals contraction. 

Economists polled by Bloomberg had forecast a pick-up from the previous month's reading. Analysts say the overall reading was likely pulled down by recent weakness in the electronics sector, which reported a contraction in output over the last two months. They also say Singapore's PMI was disappointing, compared to the strong performance by manufacturing powerhouses in the region. China's PMI for instance, quickened to a six-month high of 51, while Japan's hit 51.5.

"Some of it may be due to company specific news, but if you look at even the global semiconductor book-to-bill ratio, that's come back to one-time again, which means that it is sitting between contraction and expansion territory, so it does suggest to us the order pipeline is not as strong as it should be, especially in the third quarter, going into the Christmas season," explained Ms Selena Ling, Head of Treasury Research and Strategy at OCBC Bank.

PMI for the electronics sector rose to 50.7 from 50.4 in May, indicating growth in new orders from domestic and overseas markets.

Economists are hopeful that Singapore, being an economy that largely exports intermediate components for final products, will benefit from the pick-up in manufacturing activity in the region in the medium term.

Said Francis Tan, an economist at United Overseas Bank: "Singapore, being a country that exports predominantly intermediate products for final assembly, we're also going to see that trickling down to demand for Singapore exports, but then again there will be some lag-time coming up, it's not immediate that we see improvement in demand for manufactured goods. But definitely, in the medium-term, we're likely to see positive sentiments coming over to our manufacturing industry."

In light of the weaker-than-expected PMI numbers in June - economists are pencilling in year-on-year growth of below 1% for the manufacturing sector for the second quarter of this year, down from 9.8 percent growth in the previous three months.

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