Singapore manufacturing sentiment leans toward growth in December as PMI inches up by 0.1 point to 50.5

SINGAPORE'S factory sector continued its growth in December, as manufacturing sentiment picked up again from the month before, a survey on Monday showed.

The Purchasing Managers' Index (PMI) rose to 50.5 points, up by 0.1 point against November's reading, according to the Singapore Institute of Purchasing and Materials Management (SIPMM), which compiles the industry poll.

The uptick in overall PMI, which marked manufacturing's sixth straight month of expansion, was attributed to faster pick-up in new orders, factory output and inventory. Readings above 50 points indicate expansion, while those below 50 point to contraction.

Meanwhile, the PMI for Singapore's lynchpin electronics cluster grew for the fifth straight month, adding 0.1 point to 51.2 points - its highest level since September 2018.

"The December PMI indicates that the overall manufacturing sector has ended the eventful year with a positive reading," said Sophia Poh, SIPMM vice-president for industry engagement and development, in a statement.

"It is heartening to note that the sector is looking ahead to a brighter outlook for the new year."

Still, overall employment and electronics supplier deliveries both shrank for the 11th straight month - the only two sub-PMIs in the red in December.

The continued contraction in electronics deliveries suggested "supply disruptions due to Covid-19 restrictions in the global electronics markets", the SIPMM said.

OCBC chief economist Selena Ling said the December PMI "definitely bodes well for manufacturing and especially electronics momentum at the start of 2021", but called the improvement "quite marginal".

"Global demand conditions and the growth recovery story will be very much dependent on the covid situation and vaccination progress, both domestically and globally," she said.

"If there is further progress made towards the reopening of borders later this year, this may aid the recovery in business and consumer confidence."

Chua Hak Bin, senior economist at Maybank Kim Eng, told The Business Times: "The incremental improvement in the PMI is consistent with the manufacturing surge in recent months.

"Manufacturing will continue to expand at a healthy pace in 2021, but will likely moderate from the strong growth seen in 2020."

Dr Chua expects manufacturing growth to ease 3.2 per cent in 2021, "after the strong V-shaped rebound of 7.1 per cent in 2020".

Still, sentiment gauges for the manufacturing sector were mixed in the rest of the region.

China's official manufacturing PMI cooled to 51.9 in December from 52.1 in November, while the private-sector Caixin PMI eased to 53.0, from 54.9 before.

Ms Ling noted that manufacturing momentum in China could be peaking - a trend that "may be mirrored in other Asian manufacturing PMI in the coming months too".

IHS Markit data showed that Vietnam's PMI returned to growth in a rise to 51.7, from 49.9 in November, while Taiwan extended its gains to hit 59.4, up from 56.9. South Korea manufacturing PMI was flat month on month at 52.9 points.

"We do not expect the two key supporting factors from 2020 - that is, tech and China - to fade, at least in H1 2021," said Barclays analyst Angela Hsieh in a North Asia note on the Taiwan and South Korea PMIs.

"This, coupled with healthy inventory levels, should give producers more comfort in expanding capacity. In addition, increased capacity pressure and elevated input costs should further lift sales prices in coming months."