Sentiment around Singapore’s manufacturing sector remained buoyant in June for the twelfth consecutive month.
Data released by the Singapore Institute of Purchasing and Materials Management (SIPMM) showed a 0.1 increase in the republic’s Purchasing Managers’ Index (PMI) to 50.8.
The PMI index is a key barometer indicating a nation’s manufacturing activity. A reading above 50 indicates an expansion in output, while that below 50 points to an industry shrinkage.
The electronics PMI – a separate metric – was meanwhile up by 0.2 points 50.6 in June, making this the eleventh consecutive month of growth.
SIPMM attributed the increases in both indices to faster expansion rates in the key indices of new orders, new exports, factory output, inventory and employment.
The overall employment index – which has been growing for four months – came in at 50.5 last month.
See also: Growth in Singapore's manufacturing activity continues for tenth consecutive month in April
This follows the manufacturing economy ending the first half of the year positively as well as the employment index for the electronics industry logging its eighth month of growth, observes Sophia Poh, vice president of industry development and engagement at SIPMM.
"However, local manufacturers are concerned about the different variants of Covid-19 that could restrict economic activity and disrupt supply chains," she added.
"The expansion in June's PMI reading continues to paint a robust manufacturing backdrop, which had underpinned Singapore's economic resilience since the onset of the Covid-19 pandemic in 2020," mulls UOB economist Barnabas Gan.
He also notes of a higher risk in inflation since input prices rose to 51.5 – the highest level since November 2019. The electronics sector hit 51.8, its highest level since 2018.
The combination of these factors could spill over to consumer prices, adds Gan.
OCBC Bank’s head of treasury research and strategy Selena Ling pointed out that rising raw material and input prices, as well as the increased curbs to combat the higher Covid-19 infections, have contributed to a pullback in many regional manufacturing PMI readings.
For one, manufacturing PMI in the likes of Malaysia, Indonesia and Thailand fell in June on a month-on-month basis due to the increase in Covid-19 cases.
The aggregate PMI for emerging Asian economies fell in June for the third straight month to 50.5 due to a combination of supply bottlenecks and surging Covid-19 cases weighing on the region's manufacturing outlook, economists at Barclays say.
"This suggests momentum in manufacturing activity peaked and will likely moderate. That said, we expect North Asia to fare relatively better than Asean economies," they add.
Ling reckons that Singapore may not be immune to supply chain disruptions and pressures in input prices going ahead.
Still, economists are seemingly bullish about prospects for Singapore's manufacturing sector, which saw little impact from stricter Covid-19 measures during Phase 2 (Heightened Alert), which ended on June 14.
"The restrictions directly affect the domestic-oriented services cluster and doesn't really impact the manufacturing sector at all," said Irvin Seah, senior economist at DBS Bank. He adds that Singapore's manufacturing sector caters to external demand.
Having grown by a stellar 7.3% in 2020, the sector was a key contributor of growth during the republic’s worst recession on record.
Seah has upgraded his 2021 growth forecast for the manufacturing sector to between 8% and 9% thanks to the strong growth momentum. Gan meanwhile is looking at a growth rate of 8%.
