OPTIMISM appears to prevail among Singapore manufacturers, with the Purchasing Managers' Index (PMI) in positive territory last month, although momentum appears to have tapered slightly.
February's PMI came in at 50.5, down 0.2 point from the previous month, according to the Singapore Institute of Purchasing and Materials Management (SIPMM) on Tuesday. This marks the eighth straight month of expansion for the overall manufacturing sector.
A reading above 50 on the index indicates growth from the previous month, and one below 50 means a contraction.
The latest PMI reading was attributed to lower expansion rates in the indices of new orders, new exports, factory output and a faster rate of supplier deliveries, SIPMM said.
Meanwhile, the electronics sector PMI also dipped 0.2 point to clock 50.8 in February.
This was attributed to slower expansion rates for the indexes of new orders, new exports, factory output, and inventory, SIPMM said.
Even so, this is the seventh month of expansion for the electronics sector.
Despite the decline in both sets of PMI, economists were unfazed, pointing out that the expansionary nature of the data continues to suggest optimism, even if momentum may have slowed by a notch.
Barnabas Gan, UOB economist, said the moderation in February's PMI could be due to seasonal factors, as the Chinese New Year holidays may have affected manufacturing, export and labour demand.
Regardless, the expansionary readings suggest Singapore's industrial production is likely to grow further in February, he said.
In addition, Singapore's external environment has continued to improve, as both exports and imports PMI have been hovering above 50 since the third quarter, he said.
OCBC chief economist Selena Ling said the pullback was unsurprising, since China's Caixin manufacturing PMI slipped more than expected from 51.5 to 50.9 in February. This had led the way for similar pullbacks in India, Indonesia, Malaysia, Thailand and Myanmar, she added.
"The moderation is likely attributable to the resurgent Covid-19 cases and tightening of social restriction measures across many parts of the global economy, but there is light at the end of the tunnel in the form of an acceleration in the global rollout of vaccines," Ms Ling noted.
She is expecting the manufacturing and electronics sector to continue to "be in the drivers seat" for the Singapore economy in the first quarter, although the growth momentum could ease from that seen in the second half of last year.
"One silver lining is that the global chip shortage should continue to drive the electronics sector in the near term, with North Asian trade data, especially semiconductor exports, already reflecting the lift from stronger orders," Ms Ling said. "We tip Singapore's 2021 industrial production growth forecast at 3.5 per cent year on year, although the global chip shortage may herald more upside for manufacturing growth at this stage."
Mr Gan is keeping his manufacturing growth outlook to 3 per cent year on year, with risks appearing to be balanced. Upside risks include a quicker-than-expected rollout of the Covid-19 vaccine, while uncertainties surrounding Covid-19 and the recent rise in geopolitical tensions could deliver downside risks, he added.