- POSTED: 02 Oct 2013 22:20
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The PMI held at 50.5 for a second month in September, reflecting a cautiously optimistic mood among factories.
SINGAPORE: Singapore's manufacturing sector expanded in September at the same pace as the prior month, the latest Purchasing Managers' Index (PMI) showed, reflecting a cautiously optimistic mood among factories as they gear up for seasonally stronger demand towards the end of the year.
Recovery in the sector has yet to find a firm footing, economists told TODAY, even as global manufacturing showed a brighter outlook.
The PMI held at 50.5 for a second month in September, driven by new orders and new export orders along with a higher production output, the Singapore Institute of Purchasing & Materials Management (SIPMM) said on Wednesday.
This is the seventh consecutive month Singapore's PMI has remained above the 50-point mark that separates expansion from contraction.
CIMB Economist Song Seng Wun said the latest PMI data continues to suggest an overall positive outlook, but noted that the pace of expansion lags a stronger recovery globally.
"Singapore's manufacturing recovery is not quite on solid ground. It's an expansion, but just slightly above 50 — very modest compared to 56.2 in the US last month," he said.
Meanwhile, the global PMI (by JPMorgan) rose to a 27-month high of 51.8 in September, supported by stronger numbers from regional manufacturers such as Korea, Japan, Taiwan, Indonesia and Vietnam.”
Singapore's comparatively weak PMI was held back by a dip in new orders and new exports, which while remaining in expansionary territory, fell to 51 and 51.1 points respectively in September from 53 and 53.4 the previous month. A "choppy tech recovery" also played a part, Mr Song said.
"Certain segments — particularly those related to consumer electronics — are still not seeing a significant rebound as we head towards the seasonally stronger fourth quarter," he said.
The key electronics sector dipped 1 point from the previous month to 50.3 in September and was lower than analysts’ expectations of 51 points, Mr Song noted.
The electronics new orders and new export orders indices also dropped to 51.3 and 51.7 respectively from 53.6 and 54 in August, while the inventory index declined to 48.3 from 51.8, entering the contraction zone for the first time since February.
Barclays Economist Joey Chew sees this as something positive.
"The electronics sector had a front-loaded momentum, having expanded in the second quarter ahead of an actual pick-up in demand and resulting in an inventory build-up. Once the sector clears its inventory, I expect it to realign with the improving external conditions, starting in the fourth quarter. The electronics outlook is positive," Ms Chew said.